Common Law Remedies
Remedies that are available to the innocent party in the event of a breach of contract
can be divided into three categories: common law, equitable, and remedies which arise
from the parties’ own agreement.
All common law remedies are available as of right. Damages is the usual remedy for a
breach. It 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
innocent parties are entitled to such damages as will put them in the position they would
have been in if the contract had been performed.
LIMITATIONS FOR DAMAGES
There are three limitations for damages: causation, remoteness, mitigation.
1. CAUSATION
A person will only be liable for losses caused by their breach of contract. The
defendant’s breach need not be the sole cause of the loss, but it must be an effective
cause.
County Ltd v Girozentrale Securities
The claimants would not have suffered their if there had not been a number of events,
of which the defendants’ breach was but one. The court held that the defendants’
breach remained the effective cause of the claimants’ loss and they were liable for
damages.
Quinn v Burch Bros (Builders)
The defendant failed to supply a stepladder. The claimant stood on a folded trestle and
broke his hand. The court held that the cause of the claimant’s injury was his own
choice to use unsuitable equipment.
2. REMOTENESS
There are some losses which clearly result from the defendant’s breach, but are too
remote from the breach for it to be fair to expect the defendant to compensate the
claimant. The rules concerning remoteness were originally laid down in Hadley v
Baxendale, there are two situations where the defendant should be liable:
, 1. Loss which would arise naturally from the breach, and
2. Loss (unusual) which may reasonably be in the contemplation of the parties at
the time when they made the contract.
Victoria Laundry (Windsor) v Newman Industries
As a result of the breach, the claimants lost normal profits of 16 per week and a
Government contract of 262 per week. The court held that the defendants were liable
for the 16 per week, but not for the 262, as they did not know about the Government
contract.
The Heron II
The shipowners did know that there was a market for sugar at Basrah, and the
claimant’s intention to sell the sugar at Basrah when they arrived was so probable that it
would be arised naturally, despite the shipowners not being told their intention.
Jackson v Royal Bank of Scotland
The House of Lords 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.
Transfield Shipping v Mercator Shipping (The Achilleas)
It was held that in determining the issue of remoteness the courts had to take into
account the parties’ apparent intentions as to where responsibility for losses should fall,
as this was relevant to determining what losses the parties could have reasonably
foreseen.
Supershield v Siemens Building Tech
It was confirmed that:
1. Hadley v Baxendale remains the standard rule, but
2. The Achilleas approach should be taken where the parties’ apparent intentions
could not be reflected.
Remedies that are available to the innocent party in the event of a breach of contract
can be divided into three categories: common law, equitable, and remedies which arise
from the parties’ own agreement.
All common law remedies are available as of right. Damages is the usual remedy for a
breach. It 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
innocent parties are entitled to such damages as will put them in the position they would
have been in if the contract had been performed.
LIMITATIONS FOR DAMAGES
There are three limitations for damages: causation, remoteness, mitigation.
1. CAUSATION
A person will only be liable for losses caused by their breach of contract. The
defendant’s breach need not be the sole cause of the loss, but it must be an effective
cause.
County Ltd v Girozentrale Securities
The claimants would not have suffered their if there had not been a number of events,
of which the defendants’ breach was but one. The court held that the defendants’
breach remained the effective cause of the claimants’ loss and they were liable for
damages.
Quinn v Burch Bros (Builders)
The defendant failed to supply a stepladder. The claimant stood on a folded trestle and
broke his hand. The court held that the cause of the claimant’s injury was his own
choice to use unsuitable equipment.
2. REMOTENESS
There are some losses which clearly result from the defendant’s breach, but are too
remote from the breach for it to be fair to expect the defendant to compensate the
claimant. The rules concerning remoteness were originally laid down in Hadley v
Baxendale, there are two situations where the defendant should be liable:
, 1. Loss which would arise naturally from the breach, and
2. Loss (unusual) which may reasonably be in the contemplation of the parties at
the time when they made the contract.
Victoria Laundry (Windsor) v Newman Industries
As a result of the breach, the claimants lost normal profits of 16 per week and a
Government contract of 262 per week. The court held that the defendants were liable
for the 16 per week, but not for the 262, as they did not know about the Government
contract.
The Heron II
The shipowners did know that there was a market for sugar at Basrah, and the
claimant’s intention to sell the sugar at Basrah when they arrived was so probable that it
would be arised naturally, despite the shipowners not being told their intention.
Jackson v Royal Bank of Scotland
The House of Lords 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.
Transfield Shipping v Mercator Shipping (The Achilleas)
It was held that in determining the issue of remoteness the courts had to take into
account the parties’ apparent intentions as to where responsibility for losses should fall,
as this was relevant to determining what losses the parties could have reasonably
foreseen.
Supershield v Siemens Building Tech
It was confirmed that:
1. Hadley v Baxendale remains the standard rule, but
2. The Achilleas approach should be taken where the parties’ apparent intentions
could not be reflected.
