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Warning: TT: more functions defined than expected Warning: TT: more functions defined than expectedRemediesCommon Law Remedies – DamagesAn award of damages is the usual remedy for a breach of contract is an award of money that aims to compensate the innocent party for the financial losses have suffe...

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Re me di e s Co mmonLa wRe me di e s–Damag e s An award of damages is the usual remedy for a breach of contract.It is an award of money that ai mst oc o mpe ns a t et hei nnoc e ntpa r t yf o rt hefina nc i a ll o s s e sha v es uffe r e da sar e s ul to ft he br e a c h. Damages for breach of contract are available as of right where the contract has been breached. The g e ne r a lr ul ei st ha ti nno c e ntpa r t i e sa r ee nt i t l e dt os uc hda ma g e saswi l lputt he mi nt he po s i t i o nt he ywo ul dha v ebe e ni ni ft hec ont r a c tha dbe e npe r f o r me d. When a contract is breached, a party may suffer pecuniary loss (that is to say financial loss) or non-pecuniary loss.

1 .Pe c uni a r yLo s s Damages aim to compensate the innocent party for their fina nc i a ll o s s e st ha tr e s ul tf r o m no t r e c e i v i ngt hepe r f o r manc eba r g ai ne df or . In general, such losses include phy s i c a lha r mt ot hec l a i ma nt so rt he i rpr o pe r t ya nda nyo t he r i nj ur yt ot he i re c o no mi cpo s i t i o n.

2 .No npe c uni a r yLos s As we have seen, contract damages usually aim to compensate for financial (pecuniary) loss. They have traditionally not been available to compensate non-pecuniary loss, such as mental distress. This has been a key distinction between the law of contract and tort for, while i nc ont r a c tl a w da mag e sf o rme nt a ldi s t r e s sha v eno tbe e na v a i l a bl e , s uc hda ma g e sar ea v a i l a bl ei nt o r tl a w. In reality, following a breach of contract, a claimant might suffer not only financial loss but also mental distress, such as disappointment, hurt feelings or humiliation, but damages for such nonpecuniary losses are generally not recoverable in contract. The main policy consideration for this seems to be a concern to keep contractual awards down, to pr o v i def a i rc ompe ns a t i o nwi t houte nc o ur a g i ngunne c e s s ar yl i t i g a t i o nby offe r i nge x c e s s i v e c ompe ns a t i o n. In Hayes v Dodd (1990) Staughton LJ stated: TheEn g l i s hc o ur t ss h o ul dbewa r yo fad op t i n g . . . t heUn i t e dSt a t e sp r ac t i c eofh u g eawa r d s . Dama g e sa wa r de df orne g l i g e n c eo rwan to fs k i l l , wh e t he ra g a i ns tp r of e s s i o na lme no ra n y on e e l s e , mu s tpr o v i d ef a i rc o mpe n s a t i o n, b utn omor et ha nt h a t .An dIwo u l dn o tv i e wwi t h e n t h us i as mt h epr os p e c tt h ate v e r ys h i p own e r .I nt h eCo mme r c i alCo ur t , ha v i n gs u c c e s s f ul l y c l a i me df o run pa i df r e i g h to rd e mur r a g e , wou l db ea bl et oa d dac l a i mf orme n t ald i s t r e s s s u ffe r e dwhi l eh ewa swa i t i n gf orhi smo ne y . Damages for mental distress are not awarded for commercial contracts. Key case: Addis v Gramophone Co Ltd (1909) Legal principle: Da ma g e sf o rme nt a ldi s t r e s sa r eno ta wa r de df o rc o mme r c i a lc o nt r a c t s . 

The claimant had been employed as a manager of a company in India. 

He was wrongfully sacked for alleged dishonesty. He brought an action claiming that the manner of his dismissal had been harsh and 

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humiliating. He had been ostracised by the British community in Calcutta.

As a result he had suffered mental pain and anguish. 

The HOL held that he could recover the usual damages for loss of salary and 

commission, but not for the injury to his feelings caused by the way in which he was sacked. 

However, recent cases have developed the principle that, in a limited number of situations,

injury to feelings (generally called mental distress) and loss of amenity will be compensated.  Initially, such compensation was l i mi t e dto cases involving contracts whose who l epur po s e wast hepr o v i s i onofpl e a s ur e , r e l ax a t i o na ndpe a c eo fmi nd. More recently, the HOL has allowed damages for non-pecuniary loss where a major object 

(though not the whole purpose) of the contract was to provide pleasure, relaxation and peace of mind. Mental suffering can be compensated if it is r e l a t e dt oph y s i c a li nc o nv e ni e nc eand di s c o mf o r tc a us e dbyt hebr e a c hoft hec o nt r ac t . 

In addition, in contracts of employment, br e a c hoft hei mpl i e ddut yo fmut ua lt r us ta nd c onfide nc ecan give rise to an award of damages for financial loss resulting from the psychiatric 

harm caused.

 a. Contract where the whole purpose is pleasure, relaxation and peace of mind Key case: Jarvis v Swans Tours Ltd (1973)  Legal principle: Whe r eac o nt r a c tf o rr e c r e a t i o nha sbe e nbr e a c he d, da mag e sf o rno npe c uni a r yl o s sc a nbea wa r de d. The claimant was a solicitor who had booked a two-week winter sports holiday thatwas described in the brochure as a ‘house party’. The brochure stated that there would be a welcoming party, afternoon tea and cakesand a yodelling evening. 

In the event, there was no welcoming party, the afternoon tea consisted largely of crisps and the yodeller turned out to be a local man who arrived in his working clothes, sang a couple of songs and then left.

The ‘house party’ also left something to be desired, consisting of 13 holidaymakers in the house in the first week, but in the second week Mr Jarvis was the sole member of the ‘house party’.

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The holiday had cost £63. 

The holiday company was clearly in breach of contract and the judge at first instance awarded Mr Jarvis half the contract price, on the basis that Mr Jarvis had received some benefit, in the shape of transport and accommodation, and the sum awarded was the difference in value between what he expected and what he got. Not surprisingly, Mr Jarvis appealed. 

The COA raised the damages to £125 on the basis that merely giving him back the cost 

of the holiday would not adequately compensate his loss, and instead the damages should take account of his disappointment and distress. Lord Denning explained: 

1. It is true he was conveyed to Switzerland and back and had meals and bed in the hotel. 2. But that is not what he went for. 3. He went to enjoy himself with all those facilities which the defendants said he would have. 4. He is entitled to compensation for the loss of those facilities, and for his loss of enjoyment. The case was compared with where a man plans to go to an evening opera performance in Glyndebourne. He arranges to hire a car for the night, but the car fails to turn up and he misses the performance. He would be entitled to claim from the car hire company, not just the cost of his ticket, but also for his disappointment at missing the concert. This case was affirmed in Jackson v Horizon Holidays Ltd (1975).  

In Heywood v Wellers (1976) Legal Principle: Whe r eac o nt r ac ti sf ort hepr o v i s i o no fapr o duc tf orl e i s ur ea c t i v i t i e s a ndt hi sc o nt r a c ti sbr e a c he d, da ma g e sf orl os so fpl e a s ur ea nd a me ni t yma ybea war de d.

The claimant, Sheila Heywood, was a single parent living in Penge who met a married man with whom she had an affair.

Later, they split up, but he began stalking her. The claimant went to the defendants, a firm of solicitors, to seek an injunction against her former companion. The defendants negligently failed to do so, with the result that the claimant had to suffer further harassment. The COA held that she could recover for the mental distress caused by the breach of contract. Ruxley Electronics and Construction Ltd v Forsyth (1995) Legal principle: Whe r eac o nt r a c ti sf ort hepr o v i s i o no fapr o duc tf orl e i s ur ea c t i vi t i e s a ndt hi sc o nt r a c ti sbr e a c he d,da ma g e sf o rl o s so fpl e a s ur ea nd a me ni t yma ybea wa r de d. In this case, a contract had been entered into for the construction of a swimming pool 

for £70,000. Theclaimantmadeitclearthatoneendofthepoolhadtobe7ft6indeepashe needed this depth 

to feel safe when diving. In fact, on completion, it was only 6 ft 9 deep. 

Mr Forsyth had contracted for a swimming pool for reasons of pleasure, and in this 

sense his expectation had not been fulfilled. The trial judge awarded the defendant £2500 for loss of amenity and pleasure, an award 

that was approved by the HOL. This was to compensate the pleasure lost by the defendant by not feeling safe when he 

dived into the swimming pool.

 b. Contracts where a major object is pleasure, relaxation and peace of mind

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Farley v Skinner (2001) Legal principle: Da ma g e swi l lbea wa r de df o rl o s so fa me ni t ywhe r eama j o ro bj e c to f t hec o nt r ac ti spl e a s ur e , r e l ax a t i o na ndpe ac eo fmi nd. Mr Farley was the claimant in the case of Farley v Skinner, who was thinking of buying a house in the Sussex countryside where he would spend his retirement.

He paid a chartered surveyor, Mr Skinner, to look at the property, and specifically instructed him to assess the impact of aircraft noise on the property. The house was 15 miles from Gatwick airport. The surveyor was negligent in carrying out this work and advised Mr Farley that it was ‘unlikely that the property will suffer greatly from such noise’. After Mr Farley had spent a considerable amount of money renovating the house and had moved into the property, he discovered that the house was in fact badly affected by aircraft noise, particularly at weekends. It seems that the house was positioned near a navigation beacon an at busy times aircraft flew around this beacon while they waited for a slot to land. Mr Farley’s enjoyment of the house was badly affected. He brought an action against the surveyor for the difference in the value of the house between what he paid and what it was worth with the aircraft noise. This part of his claim was unsuccessful because it was found that the price he paidwas the market value for the house taking into account the aircraft noise. In addition, he included a claim for non-pecuniary damages for the loss of amenity caused by the aircraft noise. At first instance, the claimant was awarded £10000 for distress and inconvenience. The HOL upheld this award. The House held that it did not matter that the object of the contract with the surveyor was not entirely to give pleasure, relaxation or peace of mind, since this was nonetheless a major and important object of the contract. The surveyor had been specifically asked to report on aircraft noise. It would be perverse to allow someone to recover damages if they had just asked a surveyor to report on aircraft noise, but not where the client (like Mr Farley) had specifically asked the surveyor about that issue as well as some other matter. That would be a distinction of form and not substance. From now on, ‘it is sufficient if a major or important object of the contract is to give pleasure, relaxation or peace of mind’.

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The House emphasised that awards of damages in this area should be modest. 

While they allowed the trial judge’s award of £10000 to stand, it was noted that this was at the very highest end of the scale. They did not want the award to encourage a litigation culture 

 c. Mental suffering caused by physical inconvenience 

Mental suffering can be compensated if it is caused by physical inconvenience and discomfort resulting from the breach of contract. In Perry v Sidney Philips and Son (1982)

The claimant bought a house, relying on a survey prepared by the defendants. Their report stated that the house was in good order, but it was found to have many faults, including a leaking roof and a septic tank that gave off an offensive odour. These problems with the property caused the claimant distress, worry and inconvenience. As well as awarding damages for the reduced value of the property, the COA awarded damages for the physical inconvenience and discomfort caused by having to live in the house while the builders were doing repairs and for mental distress. In Bailey v Bullock (1950) The claimant brought an action against his solicitor for failing to act to recoverpossession of a house which had been leased to a third party. As a result of the delay, the claimant was required to live in a small house with hisparent-inlaw. Damages for discomfort were awarded. The HOL noted in Farley v Skinner that the concept of physical inconvenience shouldnot be narrowly interpreted, and could include the harmful effects of aircraft noise. The House stated that ‘aircraft noise was something which affects the claimant through his hearing and can be regarded as having a physical effect on him’.

 d. Breach of implied duty of mutual trust and confidence 

Contracts of employment include an implied duty of mutual trust and confidence. 

The HOL ruled in Eastwood v Magnox Electric plc (2004) that breach of this implied term can give rise to an award of damages for the financial losses incurred as a result of illness, including psychiatric illness, caused by unfair treatment by an employer in breach of the contract.

3 .Li mi t a t i onso nAwar dso fDa ma g e s 

 The general rule is that innocent parties are entitled to such damages as will put them in the position they would have been in it the contract had been performed, but there are three limitations, which will be considered under the headings of causation, remoteness and mitigation.

 a. Causation 

A person will only be liable for losses caused by their breach of contract. 

The defendant’s breach need not be the sole cause of the claimant’s losses, but it must be a n e ffe c t i v ec aus eo ft he i rl os s . It i sno te no ughif the breach merely pr o vi de dthe claimant wi t ht heo ppo r t uni t yt os us t ai n 

l os s . 

I nt e r v e ni nga c t sbetween the breach of contract and the loss incurred ma ybr e a kt hec ha i no f

c a us a t i on. Those e v e nt swhi c hwe r er e a s o na bl yf o r e s e e a bl ewi l lno tbr e a kt hec ha i no fc aus a t i o n. Sometimes a loss can be caused partly by a breach of contract and partly by some other factor. The general rule is that whe r ebr e a c hc anbes ho wnt obea na c t ualc a us eo ft hel o s s ,t hef ac t t ha tt he r ei sa no t he rc o nt r i but i ngc aus ewi l lno tpr e v e ntt hee xi s t e nc eofc aus a t i o n. In County Ltd v Girozentrale Securities (1996): The claimants’ bank agreed to underwrite the issue of 26 million shares in a publicly quoted company. The defendants were stockbrokers who were engaged by the claimants to approach potential investors in the shares.

The brokers breached the terms of their contract and, in due course, the claimants found themselves with some 4.5 million shares on their hands which, the price of the shares having fallen, represented a loss of nearby 7 million. They sued the stockbrokers, and the main issue in the case was whether the claimants’ loss was caused by the defendants’ breach of contract. In effect, the claimants would not have suffered their loss if there had not been a concurrence of a number of events, of which the defendants’ breach of contract was but one. The COA held that the brokers’ breach of contract remained the effective cause of the 

claimants’ loss; the breach did not need to be the only cause. The defendants were therefore liable to pay damages. 

In Quinn v Burch Bros (Builders) Ltd (1996): 

The claimant was an independent sub-contractor carrying out such building work as plastering on a building project. In breach of their contractual undertaking to supply equipment ‘reasonably necessary’ for the work, the defendant failed to supply a stepladder. The claimant found a folded trestle, and stood on it to do the work. He slipped and broke his hand. The COA held that the cause of the claimant’s injury was his own choice to use unsuitable equipment. The defendant’s breach of contract was only the occasion for the accident, not its legal cause.

 b. Remoteness There are some losses which clearly result from the defendant’s breach of contract, but are 

considered too r e mo t ef r o mt hebr e a c hfor it to be fair to expect the defendant to compensate the claimant for them. 

Take, for example, the situation where a taxi driver is booked to take a passenger to the airport

in time for a certain flight to New York, where the passenger expects to complete a deal worth 1 million.

If the taxi driver breaches the contract by arriving late and makes the passenger miss the flight, 

the taxi firm may be liable for expenses such as any extra cost for getting the next flight, but is unlikely to be expected to compensate the passenger for the lost 1 million. The rules concerning remoteness were originally laid down in Hadley v Baxendale. 

Hadley v Baxendale (1854) 

Legal principle: Damages will be awarded for [1] Lo s swhi c hwoul da r i s ena t ur a l l yf r o m t hebr e ac ho fc o nt r a and c t[2] Loss as may r e a s ona b bel y supposed to have been i nt he c ont e mpl a t i ono ft hepa r t i e swhe nt he yma det hec o nt r ac t , as t hepr o ba bl er e s ul to f i t sbr e a c h.

The case concerned a contract for delivery of an important piece of mill equipment, which had been sent away for repair. The equipment, an iron shaft, was not delivered until some days after the agreed date. This meant that the mill, which could not work without it, had stood idle for that period. The mill owners attempted to sue for loss of the profits they would have made in the time between the agreed delivery date and the actual delivery. Recovery under the first limb is about determining in advance what, objectively, is likely to happen if breach occurs. Under the second limb, unusual losses resulting from breach can still be recovered if the circumstances giving rise to them were known when the contract was made. In practice, it is the second ‘reasonable contemplation’ test which has proved the most important in subsequent cases. In this case, they did not consider the lost profit to fall within either category. The fact that the mill could not work without the equipment was not considered to be a 

loss that arose in the usual course of things, because there could well have been a spare; nor could such a loss be said to be within the contemplation of the defendants, because the mill owners had failed to make it clear that the mill could not work without the shaft. It is therefore important to inform the other contracting party at the time of contracting of circumstances whi c ha ffe c tpe r f o r manc e ,to prevent a subsequent loss being found to be too remote.

The approach in Hadley v Baxendale was reaffirmed in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd and then discussed again by the HOL in The Heron II. These two cases addressed the problem of abnormal losses – those which could not be said to 

occur ‘in the normal course of things’, but which, on the other hand, the defendant might well have been able to contemplate when making the contract.  

In Victoria Laundry (Windsor) Ltd v Newman Industries Ltd (1949) Legal principle: Ade f e nda nts ho ul donl ybel i abl ef ors uc hl os s e saswe r e‘ r e as o nabl y f o r e s e e a bl e ’a sar i s i ngf r o mt hebr e ac h. The claimants were launderers and dyers, who needed to buy a large boiler in order to expand their existing business and take on a very well-paid Government contract. They contracted to buy such a boiler, second-hand, from the defendants, ...