Remedies for Breach of Contract

When
1.
2.
3.
4.

discharge of contract is insufficient, there are 4 kinds of judicial remedies:

Common law remedy of damages
Common law remedy of an action for a fixed sum
Equitable remedy of specific performance
Equitable remedy of injunction

First 2 remedies are as of right, last 2 remedies are discretionary only awarded based on courts discre

1. DAMAGES
General Rule: Damages are the main remedy for breach of contract

When a contract is breached, the party in breach is generally required to pay damages to the injured p
As of right, i.e. automatic, if requirements are met
Monetary compensation paid to the injured/innocent party for its loss
Aim of damages is not punitive (not to punish but to compensate)

Principle for award of damaged

To place the innocent party, so far as money can do it, in the same position he would be in if the con
had been performed properly
Case: Robinson v Harman (1848)

TYPES OF DAMAGES
1. Unliquidated damages

Court determines damages payable see below

2. Liquidated damages

Pre-estimated amount of damages agreed by the parties

Genuine pre-estimate of the loss which could be suffered as a result of a breach of contract

3. Nominal damages

Awarded for technical breaches, i.e. no loss

(Note: liquidated damages and termination of contract are self-help remedies)

UNLIQUIDATED DAMAGES
RESTRICTIONS ON UNLIQUIDATED DAMAGES

1.
Causatio
n

1.
2.
3.
4.

Causation did the breach actually cause the loss?

Remoteness is the loss too remote to allow recovery?
Mitigation could plaintiff have avoided some of the loss?
Measure what is the value of the loss?
General rule: Breach must cause the loss suffered by the plaintiff

Case: Monarch SS Co v Karlshamns Oljefabriker (A/B) (1949)

Held: The delay was caused by unseaworthiness and not the prohibition, hence there was a breach
plaintiff can claim damages.

Once causation is established, then innocent party is entitled to losses caused by breach
Losses can be extensive, possibly infinite
General rule: Remoteness rule prevents a limitless scenario from occurring
Allows proximate cause
Disallows remote losses that are beyond the scope of compensation

st
e of loss Probability of
Limb To recover under 2ndLimb To recovered
recover under1
if they
fall

Damages can be

Held: H could not recover the loss of profit because the only information given to B was that the ite
be carried was a broken shaft, and H were the millers of the mill. B had no knowledge of lack of sp
shaft and thus of the importance of broken shaft to mills operation, hence losses are too remote an
cannot be recovered.

2. Remoteness

2.
Remoteness

Test for remoteness:

Case: Hadley v Baxendale (1854)

1st Limb can recover:

Damage that may fairly and reasonably be considered arising naturally from the brea
OR

2nd Limb can also recover:

Damage that may reasonably be supposed to have been in the contemplation of bot
parties at the time they made the contract
2nd limb comes in under special circumstances that are not discussed during formati
contract

1st Limb can recover:

Damage that may fairly and reasonably be considered arising naturally from the breach
In this case, only imputed knowledge is needed to recover under 1st limb

Imputed Knowledge
The kind or type of knowledge that everyone, as reasonable people, must be taken to know
and everyone, as reasonable persons, must be taken to know of damage flowing naturally
a particular breach of contract, ie, damage which results from the breach in the ordinary cou
things.

Need not prove that the contract-breacher had any actual knowledge that this might be
2nd Limb
can
recover:
resultof
hisalso
breach
Damage that may reasonably be supposed to have been in the contemplation of both p
at the time they made the contract
In this case, if plaintiff is trying to recover special losses that would not ordinarily be exp
to flow from a breach, he can only recover if he can prove that the defendant had actua
knowledge of the special circumstances that give rise to these special losses

Actual Knowledge
The kind or type of knowledge which the contract breaker is actually aware of; hence he wo
be liable for damage which he has actual knowledge of, even if it is not a kind or type of dam
which arises naturtowards mitigation of his lossally from the breach or does not arise in the
ordinary course
General
rule: Itofisthings.
sufficient if the type or kind of damage is foreseeable

Case: H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd (1978)

Held: D is liable. Loss fell within the 2nd limb since it was within the serious contemplation o
parties that there is a serious possibility that the pigs will suffer as a result of D's breach. Suffi
to contemplate the type or kind of damage involved, it was not necessary to contemplate the
exact amount of damage.

Innocent party has a duty to mitigate (i.e. minimise) the losses which arise from the defendan
breach of contract
Duty is to take reasonable steps to reduce the loss suffered by innocent party (e.g. to rectify
defects in construction work)
Aim of damages is to put the injured party in the position she would be in if the contract
been performed property (i.e. to meet plaintiffs expectations)
Classification of loss:

1. Expectation loss: Usual approach in breach of contract cases

2. Reliance loss: Claimable where expectation loss approach does not reflect the loss actually
suffered
Plaintiff can claim BOTH losses under normal circumstances (besides cases of bad bargain)

Note: these concepts help to understand the nature of the loss but are not principles of law ultima
question is, what is the true loss suffered?

Expectation Loss

4.
Mitigation
5.
Measure

General rule: Losses which the aggrieved party could have taken to avoid, are not
compensable, meaning if no mitigation are taken, damages will be reduced by the amoun
that could have been saved through mitigation

1. Loss of profit or loss of bargain

Expected net profit to be made if contract is performed
Difference in value: expected value vs. actual value
If loss of profit cannot be established,

2. Diminution of Value OR Cost of Cure (substitute performance)

Diminution of Value
o Aim: give the plaintiff the financial benefit that he would otherwise have obtained

contract has been performed

Difference between market or resale value of the contractual performance and the
stated in the contract
o Where the contractual performance entails the production of something which the
plaintiff intends to use in order to generate profit, compensation will be the loss of
profit which ought to have been earned had the defendant performed his obligation
Cost of Cure
o Aim: To give the plaintiff a sum of money to repair any defects due to the defenda
breach of contract
o Will be awarded the amount he will have to pay for substitute performance equival
that which the defendant ought to have provided under the contract

Limitation in claiming diminution or cost of cure,

Case: Radford v De Froberville (1977)

Held: Plaintiffs were awarded the full sum needed to rebuild the wall even though the differe
in height of the wall will not affect its security purpose.

Case: Ruxley Electronics & Construction v Forsyth (1996)

Held: Plaintiffs were not awarded the cost of cure because court felt that it would be
unreasonable to dig up the pool just for that small imperfection as the cost of cure, measur
result in damages which were disproportionate to the non-monetary loss suffered by the
employer.

Cost of Cure

Reliance Loss

4. Measure

Diminution OR

Guidelines to follow
1. Where the plaintiff has sought to mitigate his losses and incurred cost in the proce
award cost of cure
2. Where plaintiff has cured or intends to cure the defective performance by the defe
award cost of cure
3. If plaintiff wanted performance in order to profit in the sense of making an econom
gain award diminution (will be more than sufficient)
4. If plaintiff wanted performance for other purposes such as to for own use or enjoym
award
of curethat plaintiff had incurred in reliance to the contract m
Reliance
loss
are cost
expenses

Damages which would put the plaintiff in the same position where he would have been
the contract never been entered into.

Reliance loss in terms of Wasted expenditure

Case: McRae v Commonwealth Disposals Commission (1951)
Held: P was entitled to recover the purchase price, 285 and damages of 3,000 which was the
of the salvage expedition which was wasted in reliance on the promise that the oil tanker wa
Difficulties in measuring damages does not prevent innocent party from recovering
E.g. Loss of chance cases
Case: Chaplin v Hicks (1911)
Held: C deprived of opportunity to compete in beauty contest. Awarded damages for loss of chance
winning, in the amount of 1/n x $[prize amount] (n = number of contestants)

NON-PECUNIARY LOSSES

Exceptions Other

General rule: Cannot recover for disappointment, distress, loss of reputation, etc
Case: Addis v Gramophone Company Ltd
Held: Not allowed to claim damages of harsh and humiliating manner of dismissal from employment
Case: Haron bin Mundir v Singapore Amateur Athletic Association (1992)
Case: Arul v Chandran v Gartshore (2000)
*refer to pg. 486 for 3 well known exceptions*
1. Where there is substantial physical inconvenience or discomfort as a result of breach of cont
Case: Hobbs v The London and South Western Railway Company (1875)
Case: Bailey v Bullock (1950)

2. Where distress is directly consequent upon physical loss caused by the breach of contract
Case: Perry v Sidney Phillips & Son (1982) [poor living condition anxiety and dist

LIQUIDATED DAMAGES

d Liquidate

Liquidated damages are damages that are quantified by agreement between parties (i.e. in the
contract)
Usually a clause stating amount to be paid for a particular breach:
e.g. construction contract: $X,000 per day of delay
Liquidated Damages genuine pre-estimate of loss
vs.
Penalty a sum stipulated in terrorem i.e. to force party to comply
Guidelines in

2. ACTION FOR A FIXED SUM

Action to claim a sum of money due under a contract

e.g. seller of goods sues buyer for payment of the price
e.g. lender sues borrower for repayment of loan

An action in debt
o To enforce contract must prove that sum has become due
Not an action for damages
o Not to compensate for loss so no need to prove loss

3. SPECIFIC PERFORMANCE
Order to compel the party in breach to perform his contractual obligations
Granted only where damages will not provide adequate relief
e.g. Case: Beswick v Beswick
Exceptions
Specific performance will generally not be granted:
if to do so would cause severe hardship to the defendant;
in contracts involving personal service; or
in contracts requiring the constant supervision of the court

4. INJUNCTION
Court order to compel the party to refrain from doing a specified act
Types of Injunction
1.
Prohibitory Injunctions
2.
Mandatory Injunctions
Interim/interlocutory and final injunctions
interim temporary, to preserve the status quo till litigation is decided
final permanent order