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Remedies in contract law
 
 

Various remedies exist in contract law. These include:

  • Damages
  • Repudiation
  • Rescission
  • Specific performance
  • Injunctions
  • Restitutionary awards
     
 
 
 
 
 
 
Damages in Contract Law


Damages in contract law are a legal remedy available for breach of contract. Damages are an award of money to compensate the innocent party. The primary purpose of damages in contract law is to place the injured party in the position they would have been in had the contract been performed. 


Addis v Gramophone [1909] AC 488     Case summary

An award of damages in contract law is subject to the application of the rules on causation, remoteness and a duty to mitigate loss.

Causation:

 
Remoteness:

Under the rules of remoteness of damage in contract law set out in Hadley v Baxendale, a claimant may only recover losses which may reasonably be considered as arising naturally from the breach or those which may reasonably be supposed to be in the contemplation of the parties at the time the contract was made:
 
 
 
Hadley v Baxendale (1854) 9 Ex Ch 341  Case summary


The application of this principle can be seen in the following cases:

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528  Case summary

Kpohraror v Woolwich Building Society [1996] 4 All ER 119  Case summary


Pilkington v Wood [1953] Ch 770   Case summary
Czarnikow Ltd v Koufos (The Heron II) [1969] 1 AC 350   Case summary
Duty to mitigate loss

The claimant is not permitted to allow their losses to mount up. They are under a duty to take reasonable steps to reduce their loss:

Payzu v Saunders [1919] 2 KB 581  Case summary

Pilkington v Wood [1953] Ch 770 Case summary

Heads of damages

There exist various heads of damage in contract law under which an amount can be claimed to reflect different types of loss. These include loss of bargain, reliance loss, discomfort or disappointment,  inconvenience, diminution of future prospects, speculative damages and liquidated damages.

Reliance loss
 
Where it is difficult to quantify the position the claimant would have been in it may be possible to recover expenses incurred in reliance of the contract:

Anglia TV v Reed [1971] 3 All ER 690  Case summary


Discomfort, disappointment

Damages to reflect discomfort and disappointment can only be claimed where enjoyment was part of the bargain of the contract eg holidays or a meal out or entertainment. This most commonly seen in holidays which fail to meet the standard the holiday maker was lead to believe would be enjoyed:

Jarvis v Swann Tours [1972] 3 WLR 954    Case summary
Inconvenience
 
Where the claimant has been put to physical inconvenience rather than anger or disappointment that the defendant has not met his contractual obligation, the court may award a sum to reflect such inconvenience: 

 

 
Bailey v Bullock [1950] 2 All ER 1167   Case summary

Diminution of future prospects
 
Where a breach of contract adversely affects the claimant's future prospects, for example a contract promising training and qualifications, a sum can be awarded to reflect the loss:

Dunk v George Waller [1970] 2 QB 163      Case summary
Speculative damages
 
 
Chaplin v Hicks [1911]2 KB 786         Case summary


Liquidated damages/Penalty clauses
 
 
 
Parties to a contract may legitimately agree the amount of damages to be paid in the event of a breach and provide for this in their contract terms. This provides certainty to each party so that they know exactly what they are liable to pay should they be unable to perform their obligations. Such a clause will be enforceable by the courts only in so far as it is a genuine pre-estimate of loss. If it is a genuine pre-estimate it is known as a liquidated damages clause. If however, the amount specified in the contract is not a genuine pre-estimate but is aimed at deterring a breach of contract or punishing the party in breach, this is known as a penalty clause which is not enforceable: 

Cine Bes Filmcilik v United International Pictures [2003] EWCA Civ 1669    Case summary
 
Murray v Leisureplay Plc [2005] EWCA Civ 963   Case summary

Repudiation


Repudiation is a remedy available for breach of contract. Repudiation involves bringing an end to the contract. It is only available for breach of condition as oppose to breach of warranty:

Bettini v Gye (1876) QBD 183  Case summary

Poussard v Spiers (1876) 1 QBD 410  Case summary
 
It may also be available for breach of an innominate term, where the breach substantially deprives the claimant of the whole benefit of the contract.


 

See further here.


Rescission

Rescission is an equitable remedy available at the discretion of the judge. Rescission seeks to place the parties back in their pre-contractual position and thus represents an unraveling of the contract. Rescission is available where a contract is voidable as a result of a vitiating factor such as misrepresentation, undue influence or duress. The right to rescind may be lost if the claimant affirms the contract, where a third party acquires rights in the goods, through lapse of time or where restitutio in integrum is not possible.
 

Leaf v International Galleries [1950] 2 KB 86 (Case summary)


Specific performance

Specific performance is an equitable remedy available at the discretion of the judge. It is an order by the court requiring one party to perform their contractual obligation. Whilst it is often said that contracts are made to be performed and parties should be held to their contractual obligations, the courts are often reluctant to order a party to unwillingly perform the contract and specific performance is only available in limited circumstances. In considering whether to grant specific performance the courts look to whether damages would be an adequate remedy, the type of contract and whether equity requires such an order.

1. Where damages are an inadequate remedy:

If the claimant could adequately be compensated by an award of damages for the breach of contract, the courts are unlikely to order specific performance.

Compare the cases:

Nutbrown v Thornton (1805) 10 Ves 159   Case summary

Cohen v Roche [1927] 1 KB 169    Case summary


2. Type of contract

Specific performance is most commonly ordered for contracts for the sale of land

The courts are unlikely to order specific performance for contracts for personal service. 


3. Equity

Clean hands:

Walters v Morgan (1861) 3 DF & J 718    Case summary

Lamare v Dixon (1873) LR 6 HL 414  Case summary

Hardship:
  

Patel v Ali [1984] 1 All ER 978  Case summary


Injunctions


Injunctions are another form of an equitable remedy available only at the discretion of the judge. There are three types:

  1. Interlocutory or interim (temporary injunction until a court hearing)
  2. Prohibitory (a court order that a party must not do something)
  3. Mandatory (an order that a party must do something)

There is an overlap between mandatory injunctions and specific performance which has been recognised by the courts. The courts will not grant an injunction in circumstances that would in effect be an order for specific performance where it would not generally be allowed:

Page One Records v Britton [1968] 1 WLR 157   Case summary

However, this does not prevent the ordering of a prohibitory injunction which may be an indirect way of ensuring compliance with contract:

Lumley v Wagner (1852) 42 ER 687   Case summary

The court may sever terms and only order an injunction in respect of partial obligations:

Warner Bros v Nelson [1937] 1 KB 209    Case summary



Remedies in contract law