#16754 - Remedies For Breach Pq Notes - Contract Law

The vast majority of contract claims are simply a claim for the price which is not a damages claim. However, damages are always available for breach of contract.

Damages for breach of contract are virtually always compensatory. The following are some basic implications of the compensatory nature of damages for breach of contract:

(a) C can only claim for their own loss, not a third party’s

(b) Only C’s net loss is recoverable

For example, remember that the claimant would have had to pay the price in order to derive the expected profit from the defendant’s contractual performance – watch out for the risk of double-counting.

(c) Very often, the requirement of mitigation by claimant will wipe out loss

(d) Damages for breach of contract are not punitive

Addis v Gramophone Ltd: In an action for breach of contract, the claimant “is to be paid adequate compensation in money for the loss of that which he would have received had his contract had been kept, and no more”. He cannot “recover exemplary damages, or what is sometimes styled vindictive damages”. On the facts, an employee who had been wrongfully dismissed could not recover damages above that for his lost salary and commission to mark “the harsh and humiliating way in which he was dismissed”.

(e) Damages are assessed on the basis that the defendant would have performed their minimum legal obligation, according to the terms of the contract

Leverack v Woods of Colchester: Damages will only be awarded if C is entitled to recover compensation in respect of benefits which the defendant was legally obliged to confer. On the facts, an employee who had been wrongfully dismissed could not recover damages for a discretionary bonus which, but for the wrongful dismissal, he would probably have obtained.

Durham Tees Valley Airport Ltd v Bmibaby Ltd: (1) Where it is clear that C has suffered loss in respect of a legally protected right, but D had a choice between two or more ways to perform, C will be awarded damages on the less or least onerous basis, tilting matters in favour of D. (2) However, where D’s performance involves a single obligation, within which he enjoys elements of discretion, the courts are prepared to regulate this by reference to standards of reasonableness, where necessary and appropriate.

Robinson v Harman: “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.”

Expectation measure = what X expected to get

The difference between (i) the value of what was actually provided/performed and (ii) the (market) value of what should have been provided/performed if the contract had been properly performed.

Therefore, it makes sense that the market value rule is used as the prima facie measure throughout the Sale of Goods Act. Notice however that it is only prima facie – in certain circumstances it will not be the best assessment of what the claimant has actually lost, whereupon it will be displaced.

In some circumstances, the difference in value measure is wholly inadequate and the claimant might instead be awarded damages representing the cost of “curing” defective performance: for e.g., Radford v De Froberville.

In deciding if “cost of cure” damages are appropriate, the courts appear to emphasise the following factors:

(1) Whether “diminution of market value” damages are inadequate: Radford v De Froberville

(2) Whether the claimant intends to apply any damages towards finishing the work the defendant failed to do

• Radford v De Froberville. Facts: R sold part of his land to D, they both contracted that D would build a boundary wall between the property she had built and R’s. D was in breach. Analysis: this made no difference to the value of R’s land. Verdict: “If the purchaser fails to build the wall and the court is satisfied that the plaintiff intends to build it on his own land what the defendant has failed to build on his, why should he be limited to the amount by which his land is diminished in value as a saleable asset by the possibility of an occasional flood? He is interested in cultivating his garden, not selling his property.”

• Ruxley Electronics & Constructions Ltd v Forsyth: “[I]ntention is… relevant to reasonableness” and therefore “intention may be relevant to a claim for damages based on the cost of reinstatement.” If C does not genuinely intend to do the work, it would be “mere pretence” to say that the cost of reinstatement is the loss which he has in fact suffered.

• Tito v Waddell (No 2): “[If the plaintiff has suffered little or no monetary loss in the reduction of value of his land, and he has no intention of applying any damages towards carrying out the work contracted for, or its equivalent, I cannot see why he should recover the cost of doing work which will never be done. It would be a mere pretence to say that this cost was a loss and so should be recoverable as damages.” On the facts, Cs could not recover damages on the cost of cure measure when, in breach of contract, D failed to replant their island with trees after the completion of mining operations. It was relevant that Cs had resettled on another island and did not intend to carry out the work.

But NB in PQs: this has been criticised. The courts usually are not concerned with how the claimant aims to use damages.

(3) Whether “cost of cure” damages will be wholly unreasonable.

• Tito v Waddell (No 2): (1) C cannot recover damages on the cost of cure measure if that is “disproportionate”. On the facts, Cs could not recover damages on the cost of cure measure when, in breach of contract, D failed to replant their island with trees after the completion of mining operations. It was relevant that whereas the difference in value was negligible, the cost of cure amounted to several million dollars.

• Ruxley Electronics & Constructions Ltd v Forsyth: (1) “If the court takes the view that it would be unreasonable for the plaintiff to insist on reinstatement, as where, for example, the expense of the work involved would be out of all proportion to the benefit to be obtained, then the plaintiff will be confined to the difference in value.”

NB. This can be additional or alternative to the difference in value/cost of cure measure.

Addis v Gramophone Co Ltd: It used to be regarded as a general rule that such damages are not recoverable on a breach of contract.

Watts v Morrow: (1) “A contract breaker is not in general liable for any distress, frustration, anxiety, displeasure, vexation, tension or aggravation which his breach may cause to the innocent party.” (2) However, there are two exceptions where damages are recoverable: (i) “[w]here the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation”; and (ii) “for physical inconvenience and discomfort caused by the breach and mental suffering directly related to that inconvenience.”

(1) “Where the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation”:

Apply the following analogously

• Jarvis v Swan Tours: “damages for mental distress can be recovered in contract… such case is a contract for a holiday, or any other contract to provide entertainment and enjoyment. If the contracting party breaks his contract, damages can be given for the disappointment, the distress, the upset and frustration caused by the breach.”

• Expansion in Farley v Skinner: suffices where pleasure etc. was a major (as opposed to the sole) object of the contract. “It is sufficient if a major or important object of the contract is to give pleasure, relaxation or peace of mind.” On the facts, C could recover damages for distress when D surveyor, in breach of contract, negligently failed to detect that a house was blighted by aircraft noise, despite having been specifically asked by C to consider if it was. C then purchased the house in reliance on D’s survey report.

(2) “For physical inconvenience and discomfort caused by the breach and mental suffering directly related to that inconvenience”:

• Watts v Morrow: Cs could recover damages “for mental distress resulting from the physical consequence of… a breach of contract” when D surveyor, in breach of contract, failed to detect serious defects in a house. Cs then purchased the house in reliance on D’s survey report. This was because “there was discomfort from the physical circumstances of living in the house…...