REMEDIES FOR BREACH OF CONRACT

Damages is the basic remedy available for a breach of contract. It is a common law remedy that can be claimed as of right by the innocent party.

The object of damages is usually to put the injured party into the same financial position he would have been in had the contract been properly performed. Sometimes damages are not an adequate remedy and this is where the equitable remedies (such as specific performance and injunction) may be awarded. 

Damages

            a)      Nature of damages 

     The major remedy available at common law for breach of contract is an award of damages. This is a monetary sum fixed by the court to compensate the injured party.  In order to recover substantial damages the innocent party must show that he has suffered actual loss; if there is no actual loss he will only be entitled to nominal damages in recognition of the fact that he has a valid cause of action.

         b)     Rules relating to the award of damages

In making an award of damages, the court has two major considerations - 

•  remoteness of damage/loss; and
• measure of damages.

i)       Remoteness of loss

Damages can not be recovered for all losses suffered. If the loss flowing from the breach of contract is too remote then it cannot be recovered.
The rule governing remoteness of loss in contract was established in Hadley v Baxendale. The court established the principle that where one party is in breach of contract, the other should receive damages which;

•  can fairly and reasonably be considered to arise naturally from the breach of contract itself; or 
•  may reasonably be assumed to have been within the contemplation of the parties at the time they made the contract as being probable result of the breach.

Hadley v Baxendale [1854]; the crankshaft broke in the Claimant’s mill. He engaged the services of the Defendant to deliver the crankshaft to the place where it was to be repaired and to subsequently return it after it had been repaired. Due to neglect of the Defendant, the crankshaft was returned 7 days late. The Claimant was unable to use the mill during this time and claimed for loss of profit. The Defendant argued that he was unaware that the mill would have to be closed during the delay and therefore the loss of profit was too remote.

As a consequence of the first limb of the rule in Hadley v Baxendale, the party in breach is deemed to expect the normal consequences of the breach, whether he actually expected them or not. 

Under the second limb of the rule, the party in breach can only be held liable for abnormal consequences where he has actual knowledge that the abnormal consequences might follow or where he reasonably ought to know that the abnormal consequences might follow. For example, if any special circumstances exists which were actually communicated to the Defendant, the Claimant may recover any damages which would ordinarily follow from a breach of contract under the special circumstances communicated.

Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. [1949]; the claimant purchased a large boiler for use in their dying and laundry business. The defendant was aware that they wished to put it to immediate use and knew the nature of their business. The delivery of the boiler was delayed in breach of contract and the claimants brought an action for the loss of profit which the boiler would have made during the period in which the delivery was delayed. The claim contained a sum for a particularly lucrative contract which they lost due to the absence of the boiler. It was held that the claimants could only recover losses which were in the reasonable contemplation of the parties which included the loss of profit that could be expected from the lack of use of the boiler, but the claimant could not recover for the loss of the exceptionally lucrative contract since the defendant was unaware of this contract.