Remedies for breach of a contract

Damages are the primary common law remedy for breach of contract and are available as of right once breach is proved. Their aim is compensatory, not punitive.

The guiding principle is that damages put the claimant, so far as money can, in the position they would have been in had the contract been performed (Robinson v Harman). This is what distinguishes contract from tort, where damages restore the claimant to their pre-contract position.

There are three main measures of recoverable loss:

Expectation loss (loss of bargain). This protects the claimant's expectation of performance — for example, the lost profit on a sale or the difference between the contract price and the value actually received. It is the usual measure and reflects the Robinson v Harman principle directly.

Reliance loss (wasted expenditure). Where expectation loss is too speculative to calculate, the claimant may instead recover money wasted in reliance on the contract. In Anglia Television v Reed, when an actor pulled out of a film, the company recovered its wasted pre-production expenditure because the lost profit was impossible to quantify.

Non-pecuniary loss (distress and disappointment). As a general rule damages are not awarded for mere upset, but there is an exception where enjoyment or peace of mind is the very purpose of the contract. In Jarvis v Swans Tours a disappointing holiday justified damages for loss of enjoyment, and Jackson v Horizon Holidays extended this to cover distress suffered by the claimant's family.

In conclusion, the aim of damages is to fulfil the claimant's expectation of performance (Robinson v Harman), achieved chiefly through expectation loss, with reliance loss and (exceptionally) non-pecuniary loss available where appropriate.

Specific performance is an equitable remedy: a court order requiring a party to perform their contractual obligations. Because it is equitable, it is discretionary and, crucially, will only be granted where common law damages would be inadequate.

It is typically ordered for contracts concerning unique subject matter, above all land (every piece of land is treated as unique, so damages cannot truly compensate a disappointed buyer) and rare or unique goods.

Specific performance will NOT be granted in several situations:

• Where damages are adequate. If a money award would properly compensate the claimant — for example for ordinary goods freely available on the market — equity will not intervene.
• Contracts of personal service. The court will not order someone to work, as this would amount to involuntary servitude and could not be supervised. Thus an employment or performance contract will not be specifically enforced (Page One Records v Britton).
• Contracts requiring constant supervision. Where performance would need the court's continuous oversight (such as running a business or detailed building works), specific performance is refused.
• On discretionary grounds. Equity may refuse relief to a claimant who has not acted fairly ('he who comes to equity must come with clean hands') or who has been guilty of delay ('delay defeats equity').

Where specific performance is unavailable but appropriate, the court may instead award damages in lieu of the equitable remedy.

In conclusion, specific performance is a discretionary remedy reserved for cases where damages are inadequate (typically land), and is refused for personal-service contracts (Page One Records v Britton), where supervision would be needed, or on discretionary grounds.

Issue. Drive Co has breached the contract by late delivery. The issues are (i) what loss is recoverable, applying remoteness; and (ii) how Bakewell's failure to mitigate affects the award.

Rule. Damages aim to put the claimant in the position as if the contract had been performed (Robinson v Harman). However, recovery is limited by remoteness: under the two limbs of Hadley v Baxendale, loss is recoverable only if it (limb 1) arises naturally from the breach, or (limb 2) was within the reasonable contemplation of both parties because of special knowledge communicated to the defendant. The claimant must also mitigate — take reasonable steps to reduce loss — and cannot recover losses reasonable mitigation would have avoided (British Westinghouse v Underground Electric).

Application. The ordinary lost profit during the two-week delay flows naturally from late delivery of an essential oven; it falls within limb 1. This mirrors Victoria Laundry v Newman Industries, where ordinary lost business profit from a delayed boiler was recoverable. So this head is not too remote.

The £8,000 wedding contract is an unusually lucrative one-off loss. Under limb 2 it is recoverable only if Drive Co had special knowledge of it. The facts state Drive Co 'knew nothing' of the contract — exactly the position of the especially lucrative dyeing contracts in Victoria Laundry, which were too remote for want of knowledge. The wider contractual test asks whether the loss was a 'not unlikely' / serious possibility (The Heron II); an exceptional secret contract does not meet this. So the £8,000 is too remote and irrecoverable.

On mitigation, a temporary oven was available locally and Bakewell made no attempt to hire it. A reasonable bakery would have hired it to keep trading, so Bakewell cannot recover the portion of lost profit that hiring would have avoided (British Westinghouse). The duty is one of reasonableness, and the cost of hire (had it been incurred) would itself have been recoverable.

Conclusion. Bakewell can recover its ordinary lost profit (limb 1, Victoria Laundry), but reduced to reflect the failure to mitigate by not hiring the available oven (British Westinghouse). The £8,000 wedding-contract loss is too remote (limb 2 fails — no special knowledge) and is irrecoverable.

Issue. Both clients seek equitable remedies: Tom wants to force the sale of the manor; Vox Ltd wants to stop Mia performing for a rival. The issue is whether each remedy is available given that equitable remedies are discretionary and granted only where damages are inadequate.

Rule. Equity acts only where common law damages would be inadequate, and always in the court's discretion. Specific performance orders a party to perform, but is refused for personal-service contracts and where damages suffice (Page One Records v Britton). A prohibitory injunction restrains a breach of a negative obligation and may be granted even where specific performance is not, provided it does not in practice compel performance (Warner Bros v Nelson). Equity is barred by unclean hands and by delay.

Application — Tom. Greenfields is a unique 18th-century manor; land is always treated as unique, so damages cannot truly compensate Tom for losing this particular property. Damages are therefore inadequate, and the appropriate remedy is specific performance ordering Sara to convey the house. There is no bar of personal service or supervision, and nothing on the facts suggests Tom lacks clean hands or has delayed, so the order is likely to be granted.

Application — Vox Ltd. A singing engagement is a contract of personal service; the court will not order Mia to sing for Vox, as it cannot compel personal performance (Page One Records v Britton). However, Mia made a negative promise not to perform for any other company. Vox can seek a prohibitory injunction to restrain her from singing for a rival, as in Warner Bros v Nelson, where an actress was restrained from working for a competing studio. The injunction must not be drawn so widely that it effectively forces her to work for Vox (it would be refused if her only realistic choice were to sing for Vox or starve), but a properly limited injunction restraining work for the rival is available.

Conclusion. Tom is likely to obtain specific performance of the sale (unique land, damages inadequate). Vox Ltd cannot obtain specific performance of Mia's services (personal service — Page One Records), but can seek a prohibitory injunction restraining her from performing for a rival (Warner Bros v Nelson), subject to the court's discretion.

Issue. Bond has breached by building the pool to the wrong depth. The issues are: (i) the measure of damages (cost of cure vs loss of amenity); (ii) remoteness of the two consequential losses; (iii) the effect of mitigation; and (iv) whether any equitable remedy is available.

Rule. Damages aim to put Lakeside in the position as if the contract had been performed (Robinson v Harman). Where the cost of cure is wholly disproportionate to the benefit, the court may award loss of amenity instead (Ruxley Electronics v Forsyth). Remoteness limits recovery to loss arising naturally (limb 1) or within the parties' reasonable contemplation through special knowledge (limb 2) (Hadley v Baxendale; The Heron II). The claimant must mitigate (British Westinghouse v Underground Electric). Equitable remedies are discretionary and available only where damages are inadequate.

Application — measure (cost of cure vs loss of amenity). Rebuilding would cost £30,000, yet the pool is safe and usable and the diminution in value is nil. This is directly analogous to Ruxley v Forsyth, where a pool built shallower than specified did not justify the disproportionate rebuild cost; the House of Lords awarded a modest loss of amenity sum. Lakeside is therefore unlikely to recover the £30,000 cost of cure and will receive a modest loss-of-amenity award reflecting its disappointed expectation.

Application — remoteness of consequential losses. The £12,000 sponsorship depended on the exact specification and Bond knew about it; it therefore falls within limb 2 of Hadley v Baxendale (loss within the parties' contemplation through special knowledge) and is recoverable, much as the foreseeable ordinary losses were in Victoria Laundry v Newman Industries. The £40,000 confidential investor deal, by contrast, was unknown to Bond; under limb 2 it is too remote because Bond had no special knowledge of it (the position of the secret lucrative contracts in Victoria Laundry), and it is not a 'not unlikely' ordinary consequence (The Heron II). So the £40,000 is irrecoverable.

Application — mitigation. Lakeside refused a reasonable cheap remedy offered by Bond. Under British Westinghouse, a claimant cannot recover losses that reasonable mitigation would have avoided. Refusing a reasonable offer to cure may itself be a failure to mitigate, reducing any recoverable loss flowing from the uncured defect; the duty is one of reasonableness.

Application — equitable remedies. Specific performance to compel Bond to rebuild is unlikely: it is a building contract requiring supervision, and where damages (loss of amenity) adequately address the modest real loss, equity will not intervene. The 'unique waterfront plot' does not change this, because the issue is defective performance, not a refusal to convey unique land.

Conclusion. Lakeside should recover a loss-of-amenity sum, not the £30,000 cost of cure (Ruxley); the £12,000 sponsorship is recoverable (limb 2 — Bond knew) but the £40,000 investor loss is too remote (limb 2 fails — Bond did not know; The Heron II); and any award may be reduced for Lakeside's refusal of a reasonable cure (British Westinghouse). Specific performance to rebuild is unlikely (supervision; damages adequate for the real loss).

The rules on remoteness of damage decide which losses a defendant must pay for once breach is established. This essay argues that, judged by whether the law is predictable, proportionate and fair to both sides, remoteness largely achieves justice — but that it can occasionally under-compensate genuinely-injured claimants, so the balance leans slightly towards protecting defendants.

The case that remoteness achieves justice. The two limbs of Hadley v Baxendale sensibly limit liability to losses that either arise naturally or were within the parties' reasonable contemplation through special knowledge. This is just because it ties a defendant's exposure to what they could foresee and price for: a carrier cannot fairly be liable for a vast hidden loss it never knew existed. Victoria Laundry v Newman Industries applied this fairly — ordinary lost profit was recoverable, but exceptional secret contracts were not. The Heron II (Koufos v Czarnikow) refined the test to a 'serious possibility' / 'not unlikely' standard, deliberately stricter than tort's reasonable foreseeability, which is appropriate because contracting parties can allocate risk in advance. Remoteness also works alongside the duty to mitigate (British Westinghouse v Underground Electric), so the system as a whole prevents claimants from inflating recoverable loss. Together these rules deliver compensation, not punishment, in line with Robinson v Harman.

The case that remoteness can be unjust. Yet the rules are not perfect. Limb 2 is unpredictable: it can be unclear exactly how much 'special knowledge' a defendant needs before an unusual loss becomes recoverable, which creates uncertainty for both parties. The result can be under-compensation of a claimant who has suffered a real, foreseeable-to-them loss that the court nonetheless deems too remote — arguably a defendant-friendly outcome. The interaction with the measure of damages adds further difficulty: cases like Ruxley v Forsyth show courts awarding modest loss of amenity instead of the cost of cure, which can feel like rough justice to a claimant who did not get what was bargained for. Critics argue the law sometimes prioritises certainty and limiting liability over full compensation of the wronged party.

Wider perspective. Remoteness must also be seen as one control among several. Where damages would be inadequate, equity supplies specific performance or an injunction (Warner Bros v Nelson), and Dunlop v New Garage polices agreed sums by striking down penalties. This shows a system aiming at proportionate compensation rather than punishment — which supports the view that remoteness, in context, is broadly just.

Judgement. On balance, the law on remoteness does achieve justice in the great majority of cases: it makes liability predictable, ties it to what the defendant could foresee, and curbs opportunistic or inflated claims. However, because limb 2 can be uncertain and occasionally denies recovery to a genuinely-injured claimant, the balance tilts modestly in the defendant's favour. The rules therefore achieve substantial but not perfect justice — a fair compromise that values certainty highly, sometimes at the wronged claimant's expense.