Chapter Fifteen

Remedies
 Introduction
• Remedies are available to the innocent party in the event of a
breach, and all common law remedies are available as of right.
• There are also equitable remedies which are available to
innocent party whose loss cannot be compensated by common
law.
• Both categories of available remedies have different rules of
application.
 Common Law Remedies: Damages
• An award of damages is an award of money that aims to
compensate the innocent party for the financial losses they
have suffered as a result of the breach.
• The general rule is that the innocent party is entitled to such
damages as of right so as to out them in the position they
would have been in if the contract had been performed.
• The innocent party may suffer pecuniary loss or non-pecuniary
loss, and compensation for such losses differ.
 Common Law Remedies: Damages
Pecuniary loss
• Damages for such losses aim to compensate the innocent party
for their financial losses that resulted from not receiving the
performance bargained for.
• Such losses may include physical harm to claimants or their
property and any other injury to their economic position.
 Common Law Remedies: Damages
Non-pecuniary loss
• The courts have traditionally not been able to compensate non-
pecuniary loss such as mental distress due to the breach of a
contract.
• However, in reality a claimant might suffer not only financial
loss but also mental distress such as disappointment, hurt
feelings or humiliation.
• The main policy reason for not allowing damages for non-
pecuniary loss is to keep contractual awards down and to
provide fair compensation without encouraging unnecessary
litigation by offering excessive compensation: Hayes v Dodd
(1990).
 Common Law Remedies: Damages
Non-pecuniary loss
• Damages for mental distress are usually not awarded for
commercial contracts: Addis v Gramophone Co Ltd (1909).
• However, recent cases have developed the principle that, in a
limited number of situations, injury to feelings and loss of
amenity will be compensated.
• Where the major object of the contract was to provide
pleasure, relaxation and peace of mind, damages for non-
pecuniary loss may be allowed.
• Mental suffering, on the other hand, can be compensated if it
is related to physical inconvenience and discomfort caused by
the breach of the contract.
 Common Law Remedies: Damages
Contracts where the whole purpose is pleasure
• Where a contract for recreation has been breached, damages
for non-pecuniary loss can be awarded: Jarvis v Swans Tours
Ltd (1973), Diesen v Samson (1971).
• Where a contract is for the provision of a product for leisure
activities and this contract is breached, damages for loss of
pleasure and amenity may be awarded: Ruxley Electronics &
Construction Ltd v Forsyth (1995).
 Common Law Remedies: Damages
Contracts where the major object is pleasure
• Damages will be awarded for loss of amenity where a major
object of the contract is pleasure, relaxation and peace of
mind: Farley v Skinner (2001).

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: Perry v Sidney Phillips & Sons (1982).
• The House of Lords also noted in Farley’s case that the
concept of physical inconvenience should not be narrowly
interpreted, e.g. that it could include the harmful effects of
aircraft noise.
 Common Law Remedies: Limitation of
Damages
Causation
• A person will only be liable for losses caused by their breach of
the contract.
• However, they need not be the sole cause of it as long as they are
effectively the cause of the loss suffered by the victim: County
Ltd v Girozentrale Securities (1996).
• Intervening acts between the breach of contract and the loss
incurred may break the chain of causation, but events which
were reasonably foreseeable will not break the chain of
causation.
• It is a general rule that where breach can be shown to be an
actual cause of the loss, the fact that there is another contributing
cause will not prevent the existence of causation.
 Common Law Remedies: Limitation of
Damages
Remoteness
• Some losses caused by the defendant’s breach of contract can
be considered too remote from the breach for it to be fair to
expect the defendant to compensate the claimant for them.
• The case of Hadley v Baxendale (1854) laid down two
situations where the defendant should be liable for loss caused
by the breach:
– Loss which arise naturally, according to the usual course of
things, from the breach; and
– Loss as may reasonably be supposed to have been in the
contemplation of the parties at the time when they made the
contract, as the probable result of the breach of it.
 Common Law Remedies: Limitation of
Damages
Remoteness
• The first situation is about determining in advance what,
objectively, is likely to happen if breach occurs while the
second concerns unusual losses resulting from breach which
can still be recovered if the circumstances giving rise to the
breach were known when the contract was made.
• The second situation of ‘reasonable contemplation’ is more
important to subsequent cases as it is important to inform the
other contracting party at the time of the contracting of
circumstances which affect performance, to prevent a
subsequent loss being found to be too remote.
 Common Law Remedies: Limitation of
Damages
Remoteness
• Losses must be reasonably foreseeable for the defendant to be
liable due to the normal course of events arising from the
breach: Victoria Laundry’s case and The Heron II.
• The House of Lords in Jackson v Royal Bank of Scotland
(2005) emphasised that the time to determine what was
reasonably foreseeable was the time at which the contract was
made, not the time at which it was broken.
• This is because at the time the contract is made the parties
have the opportunity to limit their liability in damages when
they are making their contract as attention can be drawn to any
special circumstances outside the ordinary course of things
which they ought to have contemplated.
 Common Law Remedies: Limitation of
Damages
Remoteness
• In The Heron II the House of Lords disapproved of the phrase
‘reasonably foreseeability’ as used in Victoria Laundry since
it suggested a very low degree of probability.
• Therefore in order for the claimant to be held responsible for a
loss, that loss must be such that both parties would, at the time
the contract was made, have regarded it as ‘liable to result’
from the breach.
• Just knowing that there is a small chance of the loss occurring
is not enough to link a direct cause of the breach.
 Common Law Remedies: Limitation of
Damages
Remoteness
• From the two cases, defendants will only be held liable for a
loss due to special circumstances if they actually knew about
that circumstance at the time the contract was made, and
contracted on the basis that such circumstances do exist.
• Therefore, a party in breach has to pay for the consequences of
what the parties reasonably contemplated as the probably
result of the breach, at the time they made their agreement.
• Whether or not there was any such agreed contemplation
during the time the contract was made must be assessed
objectively.
 Common Law Remedies: Limitation of
Damages
Mitigation
• Claimants cannot simply sit back and allow losses to pile up
and expect the defendant to pay compensation for the whole
amount if there is something they could reasonably do to
reduce the loss.
• Claimants are under a duty to mitigate their loss, however they
do not have to prove that reasonable steps have been taken as
it is up to the defendant to prove that the loss could have been
mitigated: Pilkington v Wood (1953).
 Equitable Remedies
• Where common law remedies are inadequate to compensate
the claimant, equity will come in to provide an overall fairness
and justice to the case.
• However, these are not available as of right merely because
the defendant is in breach.
• The award of equitable remedies is usually by the discretion of
the courts.
Equitable Remedies: Specific Performance
• An order of specific performance is a court order compelling
someone to perform their obligations under a contract.
• This is in contrast with common law which does not force the
party in breach of the contract to perform their contractual
obligation.
• However, in practice, specific performance only rarely applies,
as the making of such an order is subject to some restrictions.
Equitable Remedies: Specific Performance
Damages must be inadequate
• Specific performance will not be applied where the claimant
could easily purchase replacement goods or performance
unless the subject of the contract is in some way unique, e.g.
contracts to sell land.
• Where the damages would only ne nominal, specific
performance may be ordered to avoid one party being unjustly
enriched: Beswick v Beswick (1968).
Equitable Remedies: Specific Performance
Hardship to the defendant
• Since specific performance is a discretionary remedy, the
court will not apply it to cases where it could cause the
defendant great hardship or unfairness: Patel v Ali (1984).

Contracts made unfairly

• Equity allows the court to refuse specific performance of a
contract which has been obtained by unfair means, even if they
do not amount to the sort of vitiating factor which would
invalidate the contract: Walters v Morgan (1861).
Equitable Remedies: Specific Performance
Contracts unsuitable for specific performance
• The two main types of contracts which are considered
unsuitable are contracts involving personal services which
would infringe personal freedom, and contracts which involve
continuous duties.
• Concerning continuous duties, it is impractical for the courts
to supervise the defendant’s proper performance, which may
inevitably lead to the defendant charging for contempt of court
if the defendant fails to follow the court’s orders: Ryan v
Mutual Tontine Association (1893).
Equitable Remedies: Specific Performance
Contracts unsuitable for specific performance
• However, there is flexibility to this, and the courts are willing
to weigh up the degree of supervision required, and the
balance of hardships if the order is made against those if it is
not: Co-op Insurance Society Ltd v Argyll Stores
(Holdings) Ltd (1997).
• Specific performance will not be applied to a contract which is
vague as to the performance required, nor to a promise which
is only supported by nominal consideration or contained in a
deed.