Remedies: Breach of Contract

There are various remedies available to an innocent party where there has been a breach of contract. The main remedy is damages, but in certain situations, equitable remedies are available.

Unliquidated damages are assessed by the court and are designed to compensate the innocent party for any losses incurred as a result of a breach of contract. However, where loss can not be proved, the innocent party will only be entitled to claim nominal damages.

There are three ways of calculating loss and which one is used will depend upon the type of loss incurred and which one will be best for the claimant.

a. Expectation Loss

Expectation loss is also known as loss of bargain. This is the traditional basis upon which damages are assessed and is designed to put the claimant in the same position they would have been in had the contract been performed.

(i) Remoteness of damage

Where a claimant’s losses are too remote, damages can not be recovered. They must be “within the reasonable contemplation” of the parties. The application of remoteness can either be from imputed or actual knowledge. In The Heron II (1969), damages were awarded for losses arising from the late delivery of sugar to Basra. The House of Lords held that the parties must have been aware that the price of sugar might fluctuate.

Pecuniary loss is the usual ground upon which damages are awarded for breach of contract. However, damages for non-pecuniary loss are sometimes awarded in certain circumstances, such as:

• Pain and suffering as a result of a physical injury;
• Physical inconvenience;
• Damage to a commercial reputation; and
• Any distress caused to the claimant.

b. Reliance loss

Reliance loss is also known as wasted expenditure loss and arises when the claimant has incurred out of pocket or wasted expenditure in preparation of or partial performance of the contract.

c. Restitution

Restitution is where the claimant has conferred a benefit on the defendant in performing their contractual duties and wants to claim that benefit back. An example of this is where the claimant has paid in advance for goods which have not been delivered.

In general though, the claimant will seek damages assessed on the expectation basis as this usually proves to be more profitable.

Liquidated Damages

Liquidated damages refers to damages set by the parties themselves where they decide upon a fixed sum being payable in the event of a breach of contract. Where the sum is a genuine pre-estimate it will be enforced by the court. However, where is it not a genuine pre-estimate it will be regarded as a ‘penalty’ which will not be enforced by the court. Unliquidated damages will be awarded instead.

Equitable Remedies

There are a range of equitable remedies available which are designed to remedy a breach of contract and enforce contractual obligations. However, such remedies are discretionary and will not be granted as of right, but various factors will be taken into consideration in deciding whether to exercise this power.