Remedies for Breach of Contract

When a party fails to perform their contractual obligations, legal remedies are available to address the breach. The most common remedy is damages, which comprises of a number of subcategories, such as compensatory damages, consequential (or special) damages, nominal damages, liquidated damages and punitive (or exemplary) damages. There are other remedies available such as specific performance, injunctions and rescission.

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The classic formulation of the purposes of contract damages was set out in Robinson v Harman (1848) 1 Exchequer Reports (Welsby, Hurlstone and Gordon) 850; (1848) 154 ER 363, by Parke B who said: “[W]here a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.”
 

Key Remedies for Breach of Contract
 

1. Damages 

Damages are monetary compensation awarded to the non-breaching party for the losses suffered due to the breach. There are various types of damages, including compensatory, consequential, nominal, liquidated damages and punitive damages. Compensatory damages aim to put the non-breaching party in the position they would have been in had the contract been performed. Consequential damages cover additional losses caused by the breach, while liquidated damages are pre-agreed amounts specified in the contract itself. Nominal damages is a small amount awarded where there is a breach but no real financial loss. Punitive damages is rare but it is to punish the breaching party for bad behaviour.
 

1. 1. Key Case Law:

      1. Hadley & Anor v Baxendale & Ors [1854] EWHC J70: Established the principle of foreseeability in damage claims, stating that damages must be such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract.

      2. Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd [1949] 2 KB 528: Applied the principle of foreseeability and allowed recovery for lost profits as a result of the breach. Per Asquith LJ, “In cases of breach of contract, the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the time of the contract reasonably foreseeable as liable to result from the breach…What was at that time reasonably so foreseeable depends on the knowledge then possessed by the parties or, at all events, by the party who later commits the breach.”
          

2. Specific Performance 

Specific performance is a court order requiring the breaching party to fulfil their contractual obligations. It is typically granted when damages are an inadequate remedy, such as in contracts involving unique or irreplaceable items. Specific performance compels actual performance rather than monetary compensation.

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1. 1. Key Case Law:

      1. Beswick v. Beswick [1968] AC 58: Affirmed that specific performance could be ordered to compel the performance of contractual obligations that are unique and where damages would be insufficient.
          

2. Injunctions 

Injunctions are court orders that prohibit a party from performing certain actions to prevent a breach or further breaches of contract. There are two types: prohibitory injunctions, which prevent an action, and mandatory injunctions, which require an action to be performed. Injunctions can be temporary or permanent depending on the circumstances and necessity to protect the interests of the non-breaching party.
 

1. 1. Key Case Law:

      1. Page One Records Ltd v. Britton [1968] 1 WLR 1578: Demonstrated the use of an injunction to prevent a party from breaching a negative stipulation in a contract.
          

2. Rescission 

Rescission is the cancellation of the contract, aiming to restore the parties to their pre-contractual positions. It is typically granted when the contract was entered into based on misrepresentation, mistake, duress, or undue influence. Rescission nullifies the contract and abrogates any obligations under it, returning both parties to their original state before the contract was formed.
 

1. Key Case Law:

   1. Lloyds Bank Ltd v. Bundy [1975] QB 326: Established that undue influence could render a contract rescindable, restoring the parties to their pre-contractual positions.