CONTRACTUAL REMEDIES
Damages Specific performance
Damages
Damages= financial remedy aims to compensate injured party for consequences of breach
Damages ensures innocent party does not suffer as a result of the other party’s breach but is put
in same position as if other party had honoured their contractual obligations
Lord Atkinson in Addis v Gramophone Ltd (1909): ‘I have always understood damages were in
nature of compensation, not punishment’
3 factors limit availability of damages: causation + remoteness + mitigation of loss
oCausation: can only recover damages if breach caused loss loss must be consequence of
breach if there is intervening act between breach and loss= no damages
County Ltd v Girozentrale Securities (1996): claimant bank wanted to sell 26million shares in
an oil exploration firm, D was a firm of stockbrokers to find investors for shares, D set about to
find investors but acted outside terms of their agreement, result of this and other factors,
many shares were unsold, claimant brought action to recover loss in region of £7milllion
Held: COA held D acted outside agreement and this breach was effect to cause loss breach
of contract can be one of several causes or sole clause
Important to mention causation in problem Q many omit in answers when remedies talk
about causation
oRemoteness: establish loss was not remotenot all loss caused by breach is recoverable
Hadley v Baxendale (1854)*: claimant owned mill, crankshaft broke and needed replacement
using original as template, claimant engage D, firm of carriers, to transport broken part to
engineers but D failed to do so within timeframe delay of arrival of new part sought
damages as mill was idle loss was remotenot be recoverable, as D never knew this was
only crankshaft claimant had gave rise to the Hadley v Baxendale test of foreseeability
Hadley v Baxendale test of foreseeability – 2 limbs
1. Loss naturally occurred from breach (implicitly within foresight) no special knowledge
2. Loss was reasonably foreseeable time contract formed had special knowledge
test was considered in Victoria Laundry and the Heron II
Victoria Laundry v Newman Industries (1949)*
Claimants ran laundry business, purchased boiler from D due for delivery in July, but boiler damaged
so delayed delivery until November, claimants had made Ds aware they needed boiler to expand
business for immediate use, claimed damages for profits and loss of government contracts they
intended to secure once boiler arrived held can recover damages for loss of profit but not from
government contracts, as D was aware of expansion so was ‘reasonably foreseeable’ but did not
know plans for government contracts 2nd limb
The Heron II (1969)*
Claimant chartered The Heron II to transport cargo of sugar that should have taken 20 days, but due
to deviation from the route by D, took 29 days price of sugar fell significantly sought damages to
cover difference of price, claimant had not told D he intended to sell sugar at the destination, but D
was aware that he was carrying sugar and that destination was popular trading place for sugar HOL
held although claimant did not tell intention to sell, D’s knowledge that he was carrying sugar and
destination was popular trading place for sugar was sufficient to make foreseeable
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, In problem Q, need to state legal principle established in Hadley v Baxndale and examples of cases
of it in operation like Victoria Laundry and The Heron II
For essay Q, need to understand the reasoning to engage properly
Type of loss caused by breach is within reasonable foreseeability, magnitude does not need to be
Parsons v Uttley Ingham Ltd (1978)*
Claimant pig farmers brought food storage hopper, which was installed negligently and lack of
ventilation caused food to go mouldy, many pigs contracted e-coli and died, claimants claimed £36k
for loss of profit, vet bills and other costs for death of pigs Held: death of pigs was natural result of
feeding pigs mouldy foods within first limb of Hadley v Baxendale, no need to consider death by e-
coli was reasonable under second limb
oMitigation of loss
Duty to mitigate= refer to principle where innocent party who suffered breach must take
reasonable steps to minimise extent of loss from breach
British Westinghouse Electric Ltd v Underground Electric Railways of London Ltd (1912)*:
Contract provided new turbines was breached where turbines were faulty, more than
reasonable steps were taken, at cost, to mitigate losses, as the turbines were replaced with
more efficient turbines which were more expensive than actual turbines contracted cannot
recover cost with over effective mitigation
Brace v Calder (1895): claimant offered employment for 2 years, after 5 months company was
dissolved which cut short the employment, but 2 owners continued the business and offered
claimant employment which he refused claim failed as did not take opportunity to reduce
losses by accepting their offer of employment
Calculation of damages: 2 methods to determine extent of damages
Expectation loss (Loss of bargain): position would have been in if contract was performed
Reliance loss: position would have been if contract was never made
Expectation loss: innocent party lost what he expected to receive from contract places party in
position would have been in if contract had been performed
oRuxley Electronics and Construction Ltd v Forsyth (1995)*: D constructed swimming pool for
claimant at cost of £70k, when work completed depth of pool was several inches less than
stipulated in the contract, to rectify would cost £20k which would put D in unacceptable
hardship considering pool was functional in every other aspect held should only receive
nominal damages (award of £2500) HOL held aim of damage is to put innocent party in
position if contract had been performed, but ruled does not necessarily mean innocent party
should be entitled to monetary equivalent of specific performance
Reliance of loss: position would have been if contract never made
oAnglia Television v Reed (1972)*: claimant TV company entered contract with actor, Robert
Reed, to star in film, Reed decided later to also take part in another film which would have
clashed, refused to go ahead in breach of contract, film was abandoned Held can claim money
spent before contract was made on film and after, as D should be aware of costs to make film
before made contract
oC&P Haulage v Middleton (1983): Middleton had licence to occupy C&Ps premises for 6months,
provided at end any improvements added to building cannot be removed C&P evicted him for
breach of contract, Middleton argued he should be entitled to damages for costs of
improvements he made Held: no recovery of reliance loss available as Middleton’s loss was
not from breach of contract, but from doing repairs not meant to do
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Damages Specific performance
Damages
Damages= financial remedy aims to compensate injured party for consequences of breach
Damages ensures innocent party does not suffer as a result of the other party’s breach but is put
in same position as if other party had honoured their contractual obligations
Lord Atkinson in Addis v Gramophone Ltd (1909): ‘I have always understood damages were in
nature of compensation, not punishment’
3 factors limit availability of damages: causation + remoteness + mitigation of loss
oCausation: can only recover damages if breach caused loss loss must be consequence of
breach if there is intervening act between breach and loss= no damages
County Ltd v Girozentrale Securities (1996): claimant bank wanted to sell 26million shares in
an oil exploration firm, D was a firm of stockbrokers to find investors for shares, D set about to
find investors but acted outside terms of their agreement, result of this and other factors,
many shares were unsold, claimant brought action to recover loss in region of £7milllion
Held: COA held D acted outside agreement and this breach was effect to cause loss breach
of contract can be one of several causes or sole clause
Important to mention causation in problem Q many omit in answers when remedies talk
about causation
oRemoteness: establish loss was not remotenot all loss caused by breach is recoverable
Hadley v Baxendale (1854)*: claimant owned mill, crankshaft broke and needed replacement
using original as template, claimant engage D, firm of carriers, to transport broken part to
engineers but D failed to do so within timeframe delay of arrival of new part sought
damages as mill was idle loss was remotenot be recoverable, as D never knew this was
only crankshaft claimant had gave rise to the Hadley v Baxendale test of foreseeability
Hadley v Baxendale test of foreseeability – 2 limbs
1. Loss naturally occurred from breach (implicitly within foresight) no special knowledge
2. Loss was reasonably foreseeable time contract formed had special knowledge
test was considered in Victoria Laundry and the Heron II
Victoria Laundry v Newman Industries (1949)*
Claimants ran laundry business, purchased boiler from D due for delivery in July, but boiler damaged
so delayed delivery until November, claimants had made Ds aware they needed boiler to expand
business for immediate use, claimed damages for profits and loss of government contracts they
intended to secure once boiler arrived held can recover damages for loss of profit but not from
government contracts, as D was aware of expansion so was ‘reasonably foreseeable’ but did not
know plans for government contracts 2nd limb
The Heron II (1969)*
Claimant chartered The Heron II to transport cargo of sugar that should have taken 20 days, but due
to deviation from the route by D, took 29 days price of sugar fell significantly sought damages to
cover difference of price, claimant had not told D he intended to sell sugar at the destination, but D
was aware that he was carrying sugar and that destination was popular trading place for sugar HOL
held although claimant did not tell intention to sell, D’s knowledge that he was carrying sugar and
destination was popular trading place for sugar was sufficient to make foreseeable
1
, In problem Q, need to state legal principle established in Hadley v Baxndale and examples of cases
of it in operation like Victoria Laundry and The Heron II
For essay Q, need to understand the reasoning to engage properly
Type of loss caused by breach is within reasonable foreseeability, magnitude does not need to be
Parsons v Uttley Ingham Ltd (1978)*
Claimant pig farmers brought food storage hopper, which was installed negligently and lack of
ventilation caused food to go mouldy, many pigs contracted e-coli and died, claimants claimed £36k
for loss of profit, vet bills and other costs for death of pigs Held: death of pigs was natural result of
feeding pigs mouldy foods within first limb of Hadley v Baxendale, no need to consider death by e-
coli was reasonable under second limb
oMitigation of loss
Duty to mitigate= refer to principle where innocent party who suffered breach must take
reasonable steps to minimise extent of loss from breach
British Westinghouse Electric Ltd v Underground Electric Railways of London Ltd (1912)*:
Contract provided new turbines was breached where turbines were faulty, more than
reasonable steps were taken, at cost, to mitigate losses, as the turbines were replaced with
more efficient turbines which were more expensive than actual turbines contracted cannot
recover cost with over effective mitigation
Brace v Calder (1895): claimant offered employment for 2 years, after 5 months company was
dissolved which cut short the employment, but 2 owners continued the business and offered
claimant employment which he refused claim failed as did not take opportunity to reduce
losses by accepting their offer of employment
Calculation of damages: 2 methods to determine extent of damages
Expectation loss (Loss of bargain): position would have been in if contract was performed
Reliance loss: position would have been if contract was never made
Expectation loss: innocent party lost what he expected to receive from contract places party in
position would have been in if contract had been performed
oRuxley Electronics and Construction Ltd v Forsyth (1995)*: D constructed swimming pool for
claimant at cost of £70k, when work completed depth of pool was several inches less than
stipulated in the contract, to rectify would cost £20k which would put D in unacceptable
hardship considering pool was functional in every other aspect held should only receive
nominal damages (award of £2500) HOL held aim of damage is to put innocent party in
position if contract had been performed, but ruled does not necessarily mean innocent party
should be entitled to monetary equivalent of specific performance
Reliance of loss: position would have been if contract never made
oAnglia Television v Reed (1972)*: claimant TV company entered contract with actor, Robert
Reed, to star in film, Reed decided later to also take part in another film which would have
clashed, refused to go ahead in breach of contract, film was abandoned Held can claim money
spent before contract was made on film and after, as D should be aware of costs to make film
before made contract
oC&P Haulage v Middleton (1983): Middleton had licence to occupy C&Ps premises for 6months,
provided at end any improvements added to building cannot be removed C&P evicted him for
breach of contract, Middleton argued he should be entitled to damages for costs of
improvements he made Held: no recovery of reliance loss available as Middleton’s loss was
not from breach of contract, but from doing repairs not meant to do
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