REMEDIES IN CONTRACT LAW.

Various remedies exist in contract law. These include:

1. Damages
2. Repudiation
3. Rescission
4. Specific performance
5. Injunctions
6. 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 House of Lords
The claimant was employed as a manager by the defendant. The defendant in breach of contract
dispensed with his services and replaced him with a new manager. The claimant brought an
action for breach of contract claiming that the level of damages should reflect the circumstances
in which he was dismissed damaged his reputation and ability to find suitable employment.
Held: Contract law seeks to put the parties in the position they would have been in had the
contract been performed. He was therefore limited to claiming wages and loss of commission
during the contractually agreed notice period. There was no right to exemplary damages or
damage to reputation in contract claims. Such claims would have to be actioned in the law of
tort.
Lord Atkinson: “In many other cases of breach of contract there may be circumstances of malice,
fraud, defamation, or violence, which would sustain an action of tort as an alternative remedy to
an action for breach of contract. If one should select the former mode of redress, he may, no
doubt, recover exemplary damages, or what is sometimes styled vindictive damages; but if he
should choose to seek redress in the form of an action for breach of contract, he lets in all the
consequences of that form of action: Thorpe v. Thorpe. One of these consequences is, I think,
this: that he is to be paid adequate compensation in money for the loss of that which he would
have received had his contract been kept, and no more.”

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:
Monarch Steamship Co Ltd v Karlshamns Oljefabriker (A/B) [1949] AC 196 House of
Lords
The claimant purchased a quantity of soya beans to be shipped on the appellant’s vessel, The
British Monarch(TBM), from Japan to Sweden. After the cargo had been loaded and the journey
commenced TBM developed problems with its boilers which caused considerable delay in the
shipment. By the terms of the charter, the appellant was to provide a seaworthy vessel and thus
the problems with the boiler amounted to a breach. During the delay period the war broke out
and TBM was ordered to unload in Glasgow. The claimant arranged for the cargo to be shipped
to Sweden and brought a claim against the defendants to recover the costs. The defendant
claimed the outbreak of the war broke the chain of causation.
Held: The outbreak of war did not break the chain of causation since the defendants should have
foreseen the possibility of this occurring and any delay of the voyage may result in diversion of
the vessel.

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] EWHC Exch J70 Courts of Exchequer
The crankshaft broke in the Claimant’s mill. He engaged the services of the Defendant to deliver
the crankshaft to the place where it was to be repaired and to subsequently return it after it had
been repaired. Due to neglect of the Defendant, the crankshaft was returned 7 days late. The
Claimant was unable to use the mill during this time and claimed for loss of profit. The
Defendant argued that he was unaware that the mill would have to be closed during the delay and
therefore the loss of profit was too remote.
Held: The damages available for breach of contract include:
1. Those which may fairly and reasonably be considered arising naturally from the breach of
contract or
2. Such damages as may reasonably be supposed to have been in the contemplation of both the
parties at the time the contract was made.

If any special circumstances exist which were actually communicated to the Defendant, the
Claimant may recover any damages which would ordinarily follow from a breach of
contract under the special circumstances communicated.

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

Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. [1949] 2 K.B 528
The claimant purchased a large boiler for use in their dying and laundry business. The defendant
was aware that they wished to put it to immediate use and knew the nature of their business. The
delivery of the boiler was delayed in breach of contract and the claimants brought an action for
the loss of profit which the boiler would have made during the period in which the delivery was
delayed. The claim contained a sum for a particularly lucrative contract which they lost due to
the absence of the boiler.
Held: The claimants could only recover losses which were in the reasonable contemplation of
the parties which included the loss of profit that could be expected from the lack of use of the
boiler, but the claimant could not recover for the loss of the exceptionally lucrative contract since
the defendant was unaware of this contract

Jackson v Royal Bank of Scotland [2005] 1 WLR 377 House of Lords

The claimants carried on business of importing goods and selling them on for resale. His main
customer was a business called Economy Bag. Both businesses banked at the Royal Bank of
Scotland (RBS), the defendant. RBS mistaken revealed some invoices to Economy Bag which
showed the mark-up that they were receiving for the services they provided. This revelation was
in breach of confidence and amounted to a breach of contract. Economy Bag were outraged at
the amount the claimants were receiving and they were also concerned that the claimants had
taken steps to hide that amount. Consequently, Economy Bag ceased to trade with the claimants.
Consequently, the claimants were deprived of their main source of income and were forced to
cease trading. The claimants brought an action against RBS to recover their loss. The trial judge
found for the claimants and ordered RBS to pay damages based on their loss of profit from
trading with Economy Bag over a four-year period. The Court of Appeal reduced this to one
year. The claimant’s appealed the reduction and RBS cross appealed contending that the loss of
profit was too remote.
Held: The loss of profit was not too remote. The Court of Appeal had erred in its application of
Hadley v Baxendale to reduce the loss of profit to one year. The trial judge’s findings as to
assessment of damages restored.

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

By the terms of the contract, the defendant was to deliver goods to the claimant on a monthly
basis and the claimant was to pay for the goods within one month of delivery. The contract was
to run for nine months. The claimant received the goods at a discounted price because he had
committed to purchase from the supplier over the nine-month period. The claimant was late in
making the first instalment (This amounted to a breach of warranty not entitling the defendant to
repudiate the contract). The defendant refused to continue with the original contract but told the
claimant that he would deliver the goods in future if the claimant paid cash on delivery and
would still let him have the goods at the discounted price. The claimant rejected this offer and
purchased the good elsewhere at a higher price. He then sued the defendant claiming the
difference between the contractually agreed price and what he actually paid for them.
Held: The claimant was not entitled to damages. He was given the opportunity to purchase at the
discounted price but rejected this. He was under a duty to take reasonable steps to mitigate his
loss. The offer was a reasonable one and one which the claimant could easily have complied
with.

Pilkington v Wood [1953] Ch 770

The claimant purchased a house which turned out to have a defective title. Shortly after the
purchase he, obtained employment elsewhere and needed to relocate. He had difficulty in selling
the house due to the defect in title He brought an action against his solicitor for his negligence in
failing to notice the defect.
Held: The solicitor was liable for the difference in value between what it was worth without the
defect and what it was worth with the defect. However, he was not liable for the added loss
caused by the need to move as it was not in the reasonable contemplation of the parties that he
would move so soon after sale.
On the issue of mitigation:
The claimant was entitled to sue the vendor, although the court held there was no duty to sue the
vendor in order to mitigate their loss arising from the defendant’s negligence.

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 Television V Reed [1971] 3 All ER 690

The claimant, Anglia Television, engaged Oliver Reed to play the leading role in a television
play. Subsequently Reed pulled out and Anglia was unable to find a replacement. They
abandoned the play but had incurred expenses amounting to £2,750.
Held: Whilst damages generally seek to put the parties in the position they would have been in
had the contract been performed, the parties may elect to claim reliance loss and recover
expenses incurred in an abortive transaction. Thus Anglia was able to recover their expenses
from the defendant.
Discomfort, disappointment:
Damages to reflect discomfort and disappointment can only be claimed where enjoyment was
part of the bargain of the contract e.g. 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 Swan Tours [1972] 3 WLR 954 Court of Appeal
Mr. Jarvis, a solicitor, booked a 15-day ski-ing holiday over the Christmas period with Swan
Tours. The brochure in which the holiday was advertised made several claims about the
provision of enjoyment relating to house parties, a friendly welcome from English speaking hotel
owner, a variety of ski–runs, afternoon tea and cakes and a Yodler evening. Many of these either
did not go ahead or were not as described. Mr. Jarvis brought a claim for breach of contract
based on his disappointment. At trial, the judge awarded him £30 damages on the basis that he
had only been provided with half of what he had paid for and that no damages could be
recovered for disappointment. Mr. Jarvis appealed.
Held: Where a contract is entered for the specific purpose of the provision of enjoyment or
entertainment, damages may be awarded for the disappointment, distress, upset and frustration
caused by a breach of contract in failing to provide the enjoyment or entertainment.

Jackson v Horizon Holidays [1975] 1 WLR 1468 Court of Appeal

Mr. Jackson booked a 28-day holiday in Ceylon for himself and his family through Horizon
Holidays. The hotel turned out to be unsatisfactory for various reasons relating to cleanliness
and provision of services. The trial judge made an award for the disappointment suffered by Mr.
Jackson, but stated he could not take into account the disappointment suffered by his wife and
children since they were not party to the contract. Mr. Jackson appealed.
Held: Mr. Jackson was able to recover for the disappointment suffered by his wife and children.
This amounts to an exception to the rule of privity of contract based on the decision in Beswick v
Beswick (1968) AC 88.

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
A solicitor failed to take action to recover the claimant’s house. As a consequence, the claimant
and his wife had to move in with his in-laws for two years.
It was held that he was entitled to recover damages to reflect the inconvenience of having to live
in overcrowded circumstances.
Barry J emphasized that there is a distinction between mere annoyance or disappointment at the
failure of the other party to carry out his contractual obligation and actual physical inconvenience
and discomfort caused by the breach.

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 and Son [1970] 2 All ER 630 Court of Appeal
The defendant engaged the claimant under a four-year apprenticeship to train him as an engineer.
The defendant terminated the contract before the completion of the contractually agreed time.
The claimant bought an action for wrongful dismissal.
Held: The claimant had been wrongfully dismissed. He was entitled not only to his wages for the
remainder of the contractually agreed period, but also a sum to reflect his lack of training and the
loss of opportunities that the completion of the contract would confer.
Widgery LJ:
“a contract of apprenticeship secures three things for the apprentice: it secures him, first, a
money payment during the period of apprenticeship, the training program will allow him or her
to acquire valuable skills; and will provide employment opportunities in the labor market
following the successful completion of the training.”

Speculative damages
Chaplin v Hicks [1911] 2 KB 786 Court of Appeal
The claimant was an actress. She entered a beauty contest organized by Hicks. Hicks was a
famous actor and theatre manager and advertised the contest in a newspaper. The readers of the
newspaper were to vote and the top 50 would be invited to an interview where 12 would be
selected for employment. The claimant got through to final 50 but did not receive her invitation
for interview until it was too late to attend. She brought an action based on her loss of a chance
of gaining employment. She was awarded £100 assessed by the jury. Hicks appealed contending
that the damages were speculative in nature and incapable of assessment.
Held:
The appeal was dismissed. The claimant was entitled to recover damages for her loss of a chance
of gaining employment. She did not have to demonstrate that she would have been successful at
interview.
Vaughan Williams LJ:
“the fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the
necessity of paying damages for his breach of contract."

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:
Murray v Leisureplay Plc [2005] EWCA Civ 963 (Court of Appeal)
Mr. Morris was employed as Chief Executive Director. His employer dismissed him with 7
weeks’ notice. Under the terms of his contract of employment he was to be given 12 months’
notice or paid 12 months’ salary in lieu of notice. Mr. Murray sought to enforce this clause and
the employer argued the clause was unenforceable as a penalty. The trial judge followed the
principle in Cine Bes and held that in determining a penalty account had to be taken of Mr.
Murray's duty to mitigate his loss and therefore held the clause to be a penalty.
Held: The clause was not a penalty. The sum may have been generous but was not
unconscionable and may have taken into account the difficulty in obtaining alternative work of
equal value.

Dunlop Pneumatic Tyre Company V New Garage & Motor co [1915] AC 79 House of
Lords
The claimant, Dunlop, manufactured tyres and distributed them to retailers for resale. The
contract between Dunlop and New Garage contained a clause preventing New garage from
selling the tyres below list price. In the event that they were in breach the contract specified that
5/. would be payable for each tyre sold below the list price. The defendants sold some tyres
below the list price and the claimant brought an action for damages based on the amount
specified in the contract. The defendant argued that the relevant clause was a penalty clause and
thus unenforceable. The trial judge held it was a liquidated damages clause and awarded the
claimant 5/. per tyre. The Court of Appeal reversed this holding that the clause was a penalty
clause and awarded the claimant 2/. per tyre representing the actual loss suffered. The claimant
appealed to the House of Lords.

Held: The clause was a liquidated damages clause not a penalty clause.

Lord Dunedin set out the differences between a liquidated damages clause and a penalty
clause:
1. Though the parties to a contract who use the words "penalty" or "liquidated damages" may
prima facie be supposed to mean what they say, yet the expression used is not conclusive. The
Court must find out whether the payment stipulated is in truth a penalty or liquidated damages.
This doctrine may be said to be found passim in nearly every case.
2. The essence of a penalty is a payment of money stipulated as interrorem of the offending
party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage
(Clydebank Engineering and Shipbuilding Co. v. Don Jose Ramos Yzquierdo y Castaneda)
3. The question whether a sum stipulated is penalty or liquidated damages is a question of
construction to be decided upon the terms and inherent circumstances of each particular contract,
judged of as at the time of the making of the contract, not as at the time of the breach (Public
Works Commissioner v. Hills and Webster v. Bosanquet)
4. To assist this task of construction various tests have been suggested, which if applicable to the
case under consideration may prove helpful, or even conclusive. Such are:
(a) It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in
amount in comparison with the greatest loss that could conceivably be proved to have followed
from the breach. (Illustration given by Lord Halsbury in Clydebank Case)
(b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and
the sum stipulated is a sum greater than the sum which ought to have been paid (Kemble v.
Farren) This though one of the most ancient instances is truly a corollary to the last test. Whether
it had its historical origin in the doctrine of the common law that when A. promised to pay B. a
sum of money on a certain day and did not do so, B. could only recover the sum with, in certain
cases, interest, but could never recover further damages for non-timeous payment, or whether it
was a survival of the time when equity reformed unconscionable bargains merely because they
were unconscionable, - a subject which much exercised Jessel M.R. in Wallis v. Smith
(c) There is a presumption (but no more) that it is penalty when "a single lump sum is made
payable by way of compensation, on the occurrence of one or more or all of several events, some
of which may occasion serious and others but trifling damage" (Lord Watson in Lord
Elphinstone v. Monkland Iron and Coal Co)

On the other hand:

(d) It is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that the
consequences of the breach are such

as to make precise pre-estimation almost an impossibility. On the contrary, that is just the
situation when it is probable that pre-estimated damage was the true bargain between the parties
(Clydebank Case, Lord Halsbury; Webster v. Bosanquet, Lord Mersey)

Euro London Appointments Ltd v Claessens [2006] EWCA Civ 385 Court of Appeal
The claimant was an employment agency the defendant was a client of the agency looking for
workers. The standard terms of the contract provided that the defendant would pay 20% of the
annual salary for each client they introduced whom the client wished to engage. In the event that
a client terminated the contract within 12 weeks of engagement the claimant would make a
refund based on the amount of time worked. However, this refund was conditional upon the fees
having been paid within 7 days of the invoice date. The defendant engaged two employees
introduced by the claimant. Neither of them worked 12 weeks. The claimant commenced an
action demanding full fees. The defendant argued they were entitled to a refund as the clause
depriving them of the right to refund was unenforceable as a penalty.
Held: The clause was not a penalty as it was not payable on breach of contract.

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
Bettini agreed by contract to perform as an opera singer for a three-month period. He became ill
and missed 6 days of rehearsals. The employer sacked him and replaced him with another opera
singer.
Held: Bettini was in breach of warranty and therefore the employer was not entitled to end the
contract. Missing the rehearsals did not go to the root of the contract.

Poussard v Spiers (1876) 1 QBD 410

Madame Poussard entered a contract to perform as an opera singer for three months. She became
ill five days before the opening night and was not able to perform the first four nights. Spiers
then replaced her with another opera singer.
Held: Madame Poussard was in breach of condition and Spiers were entitled to end the contract.
She missed the opening night which was the most important performance as all the critics and
publicity would be based on this night.

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.

Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26 Court of Appeal
A ship was chartered to the defendants for a 2-year period. The agreement included a term that
the ship would be seaworthy throughout the period of hire. The problems developed with the
engine of the ship and the engine crew were incompetent. Consequently, the ship was out of
service for a 5-week period and then a further 15-week period. The defendants treated this as a
breach of condition and ended the contract. The claimants brought an action for wrongful
repudiation arguing the term relating to seaworthiness was not a condition of the contract.
Held: The defendants were liable for wrongful repudiation. The court introduced the innominate
term approach. Rather than seeking to classify the term itself as a condition or warranty, the
court should look to the effect of the breach and ask if the breach has substantially deprived the
innocent party of the whole benefit of the contract. Only where this is answered affirmatively is
it to be a breach of condition. 20 weeks out of a 2-year contract period did not substantially
deprive the defendants of whole benefit and therefore they were not entitled to repudiate the
contract.
 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.

Car & Universal Credit v Caldwell [1964] 2 WLR 600

Mr. Caldwell sold his Jaguar car on 12th Jan to a rogue, Norris, who had paid £10 cash deposit
and left another car as security and gave a cheque for £965. The following day Mr. Caldwell
went to cash the cheque and discovered it was fraudulent and the car left as deposit turned out to
be stolen. Mr. Caldwell reported the incident to the police and used his best endeavors to co-
operate with the police to find Norris in order to rescind the contract of sale. He also contacted
the Automobile Association to try to locate the car. Norris had acquired a voidable title to the car
as the contract was induced by fraudulent misrepresentation. Norris sold the car on to a third
party on 15th Jan. The question for the court was whether the actions taken by Mr. Caldwell
were sufficient to avoid the contract.
Held: Mr. Caldwell had successfully rescinded the contract. He had taken all steps possible to
demonstrate that he no longer wished to be bound by the contract. He should not be prejudiced
by the fact that his endeavors failed to locate Norris.

Long v Lloyd [1958] 1 WLR 753

The claimant purchased a lorry from the defendant. The lorry was advertised in a newspaper
which described the lorry as being in exceptional condition. The claimant phoned the defendant
to arrange a viewing and was told it was in first class condition. He went to view it the following
day and was told it was capable of doing 40 mph and 11 miles to the gallon. The claimant test
drove it and found that the speedometer was not working and he had to pull a wire for the
accelerator as this was not working also. The claimant still decided to purchase the lorry. On the
first journey the claimant noted certain faults with the lorry and contacted the defendant who
offered to pay half the repairs. The claimant accepted this. However, on a further journey the
lorry broke down completely and the claimant wished to rescind the contract and brought an
action against the defendant for innocent misrepresentation.
Held: By accepting the offer of payment for half the repairs when he became aware of the
defects, the defendant had lost his right to rescind as he had affirmed the contract.

Leaf v International Galleries [1950] 2 KB 86

The claimant purchased a painting from the defendant. Both parties believed that the painting
was by the artist Constable. In fact, 5 years later the claimant discovered the painting was not a
Constable. The claimant brought an action based both on misrepresentation and mistake.
The claim based on misrepresentation was successful however, since it was an innocent
misrepresentation, the claimant had lost the right to rescind the contract through lapse of time.
With innocent misrepresentation the time starts to run from the date of the contract not the date
of discovery.
The claim based on mistake was unsuccessful as the mistake related to the quality and did not
render the subject matter something essentially different from that which it was believed to be.
He believed he was buying a painting and he got a painting.

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

The claimant entered a contract to purchase some machinery from the defendant. The defendant,
in breach of contract, refused to deliver the machines. The defendant was the only manufacturer
of this type of machinery. The claimant bought an action for breach of contract seeking specific
performance of the contract.
Held: Specific performance of the contract was granted. Whilst an award of damages would
ordinarily be given for non-delivery of goods, damages would be inadequate to compensate the
claimant because he would not be able to buy the machines elsewhere.

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:
Lamare v Dixon (1873) LR 6 HL 414
The defendant wished to lease some cellars. He went to view cellars owned by the claimant but
saw that they were damp. The claimant promised that he would make the cellars dry before the
lease commenced and the defendant agreed orally to take the lease. The claimant did not keep his
promise and the defendant refused to complete the lease. The claimant bought an action for
breach of contract seeking specific performance of the lease agreement.
Held: Specific performance was refused due to the claimant not keeping his promise in making
the cellars dry.
Lord Chelmsford stated: "The conduct of the party applying for relief is always an important
element for consideration."

Hardship:
Co-op Insurance Society v Argyll Stores [1997] 2 WLR 898 House of Lords
Co-op Insurance was landlord of Hillsborough Shopping Centre in Sheffield which consisted of
25 retail outlets. In 1979, Argyll Stores took a lease of one of the units for a period of 35 years
for the purpose of operating a Safeway supermarket. The lease contained a covenant by which
Argyll agreed to use the outlet as a supermarket and keep it open during the usual hours of
business. However, in 1995, head office of Argyll Stores took the decision to close 27 of their
supermarkets including the one at Hillsborough which was trading at a loss. Co-op Insurance
sought specific performance of the covenant, fearing the impact on other traders at the site if the
Supermarket was to close.
Held: Specific performance was refused.
Lord Hoffman:
“The purpose of the law of contract is not to punish wrongdoing but to satisfy the expectations of
the party entitled to performance. A remedy which enables him to secure, in money terms, more
than the performance due to him is unjust. From a wider perspective, it cannot be in the public
interest for the courts to require someone to carry on business at a loss if there is any plausible
alternative by which the other party can be given compensation. It is not only a waste of
resources but yokes the parties together in a continuing hostile relationship. The order for
specific performance prolongs the battle. If the defendant is ordered to run a business, its conduct
becomes the subject of a flow of complaints, solicitors' letters and affidavits. This is wasteful for
both parties and the legal system. An award of damages, on the other hand, brings the litigation
to an end. The defendant pays damages, the forensic link between them is severed, they go their
separate ways and the wounds of conflict can heal.”

Patel v Ali [1984] 1 All ER 978

Mr. and Mrs. Patel contracted to sell their house to Mr. Ali. Completion of the sale was delayed
by Mr. Patel’s bankruptcy. At the time that they agreed to sell, Mrs. Patel was healthy and had
one child. However, during the delay, Mrs. Patel contracted bone cancer and had to have a leg
amputated. She also had to further children and she became heavily reliant on friends and
neighbors to assist her with day to day activities. Mr. Ali sought specific performance of the
contract.

Held:

Specific performance was denied on the grounds that it would cause hardship on Mrs. Patel if
she was required to move out. Whilst the hardship was not the fault of Mr. Ali, Goulding J held
that it would be ‘hardship amounting to injustice’ if specific performance was ordered.

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
recognized 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

The claimant record company, owned by Larry Page, was the manager of the pop group, The
Troggs. By contract, The Troggs agreed that Page One Records would be their manager and sole
agent for 5 years in return for 20% of their profits. By a term of the contract The Troggs agreed
not to appoint anyone else for the duration. However, their relationship with Larry Page broke
down and The Troggs wrote a letter to the claimant seeking to terminate the contract. The
claimant sought an injunction to prevent The Troggs appointing a new manager.

Held: The injunction was refused. To grant an injunction would be akin to ordering specific
performance of a contract for personal services since the effect of the injunction would be to
compel The Troggs to continue to employ the claimant or not work at all.

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 High Court of Chancery
The defendant Johanna Wagner, an opera singer, was engaged by the claimant to perform in his
theatre for a period of three months. There was a term in the contract preventing her from singing
for anyone else for the duration of the contract. She was then approached by the manager of
Covent Garden Theatre, Frederick Gye, who offered her more money to sing for him. The
claimant sought an injunction preventing her from singing at Covent Garden Theatre. The
defendant argued that to allow an injunction would in effect amount to specific performance of
the contract in circumstances where specific performance would not be available.
Held: The injunction was granted despite it having the effect of forcing the defendant to sing for
the claimant.
Lord St Leonards LC: “Wherever this Court has not proper jurisdiction to enforce specific
performance, it operates to bind men's consciences, as far as they can be bound, to a true and
literal performance of their agreements; and it will not suffer them to depart from their contracts
at their pleasure, leaving the party with whom they have contracted to the mere chance of any
damages which a jury may give.”

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

Warner Bros v Nelson [1937] 1 KB 209

By contract, the defendant actress Bette Davis, agreed to act exclusively for Warner Bros for two
years. The contract stipulated not only that could she not act for another but also she could take
no employment of any kind. Bette Davis then moved to England and in breach of contract
entered an agreement to act for another. Warner Bros sought an injunction to prevent her from
doing so.
Held: An injunction was granted but only in so far as it prevented Bette Davis from acting or
performing for another. The term relating to no employment of any kind was severed and did not
form part of the injunction.
Branson J: “The case before me is therefore one in which it would be proper to grant an
injunction unless to do so would in the circumstances be tantamount to ordering the defendant to
perform her contract or remain idle or unless damages would be the more appropriate remedy.
With regard to the first of these considerations, it would, of course, be impossible to grant an
injunction covering all the negative covenants in the contract. That would, indeed, force the
defendant to perform her contract or remain idle; but this objection is removed by the restricted
form in which the injunction is sought. It is confined to forbidding the defendant, without the
consent of the plaintiffs, to render any services for or in any motion picture or stage production
for anyone other than the plaintiffs.”