CHAPTER 35

Common law remedies

There are a number of remedies that may be
awarded, either when:
* a contract is breached, or
* there is a vitiating factor, such as
misrepresentation, mistake or undue influence.

35.1 Purpose and nature of damages

Damages are a sum of money paid by the defendant
to the claimant once liability has been established,
in compensation for the harm suffered by the
claimant.
In contract, the purpose of the award is to compensate
the claimant for the losses suffered as a result of the
breach.
The aim of the damages is to put the person in the
position they would have been in had the contract
been properly completed and performed by the
defendant.
Unlike in tort cases, where there is often a large amount
of speculation involved, in contract law the damages
usually represent the actual financial loss, and they are
rarely speculative.
not money' unliquidated

35.2 The measure or calculation of

damages money « liquidated damage
Unliquidated damages (those assessed by the courts)
compensate the claimant for the loss they have suffered
as a result of breach. Their purpose is not to punish or
recoup the gain made by the defendant.

35.2.1 Expectation loss

In the case of expectation loss, damages are awarded
for the loss of a bargain. The aim is to put the party
in the same position, as far as money can do, as if the
contract had been performed.
35.2.2 Reliance loss
In the case of reliance loss, damages are awarded for
out-of-pocket or wasted expenditure. This is the format
used in tort, putting the parties back to where they were.
These damages are also used where it would be difficult to
assess what the benefits would have been to the claimant
CASE EXAMPLE
Anglia Television v Reed (1972)
An actor withdrew from playing the lead role in
a television film, and the production company
recovered all costs incurred to the time he
withdrew. They were reliance losses, as it could
not be known whether the project would make
a profit or loss, and so only costs incurred were
compensated for.

35.2.3 Non-pecuniary loss

In the case of non-pecuniary loss, damages will be
awarded in certain cases for such things as pain
and suffering, physical inconvenience, damage te
commercial reputation and distress to the claimant.
Traditionally, there was no award for injured feelings.
as was shown in Addis v Gramophone Co. (1909) and
subsequently confirmed in Johnson v Unisys (2001).
but some limited exceptions have been recognised,
namely in Jarvis v Swan Tours (1973) for loss of holiday
enjoyment. It is thought, however, that this will apo
to consumer contracts and not commercial contracts
and only to contracts which are specifically made in
relation to personal enjoyment.

35.3 Limitations on recovery of damages

Remoteness and causation
Causation is a question of fact in each case.
The court will decide whether the breach is the
main reason for the loss suffered by the claimant.
Generally,losses need to have been within the reasonable
contemplation of the parties at the time of the contract.
The rules governing remoteness in contract were
first set out in Hadley v Baxendale(1854).

CASE EXAMPLE
Hadley v Baxendale (1854)
A mill owner contracted with a carrier to deliver a crankshaft
for his mill. When the contract was formed,the carrier did not
know that the mill owner had no spare crankshaft and could not
operate without the one he was contracted to deliver.
The carrier was late with delivery by several days, during which
time the mill was unable to grind corn.
The mill owner sued for loss of profit but was
unsuccessful because the carrier was unaware of
the importance of the urgent delivery.
Following this case, damages will only be recoverable if:
●​ they can be fairly and reasonably considered as arising from the breach, or
●​ the parties may reasonably have contemplated the damages at the time of the
contract.

CASE EXAMPLES
Victoria Laundry Ltd v Newman Industriesv(1949)
The defendants were contracted to deliver a boiler to the laundry,
which they did five months after the due delivery date.
The laundry sued for loss of usual profits from the date of the breach,
for which it succeeded.
It also sued for loss of profit on a government contract
it had failed to perform without the boiler,but lost on the basis
that the government contract was unknown to the defendants
at the time the contract was formed.

The Heron //[1969]

A ship was chartered to carry sugar. The ship arrived late,
and when the charterers sold the sugar, the price had dropped.
The House ofLords held the ship owners liable for the loss
because they knew there was a sugar marketing the port of
destination, and should have anticipated that prices would fluctuate,
affecting the charterers.

The first rule covers loss that any reasonable person would expect to result from that type of
breach. The second rule only operates when special circumstances apply to the contract,and
the information about these special circumstances is expressly communicated to the
defendant by the claimant.

CASE EXAMPLE
Transfield Shipping Inc. v Mercator ShippingInc. ('The Achilleas')[2008〕
The Achilleas was a ship chartered by one company to another for seven months. The ship
was returned nine days late, and the owners claimed a higher loss in damages than the
hirers felt was due.
The hirers thought the loss was based on the difference between the charter rate and the
market rate,being the sum the owners could have achieved in hiring the boat for the
additional nine days, which would have given a figure of about $158000.
The owners,however, wanted the loss to include a very lucrative deal they had negotiated
when the market was at its peak, which they now had to negotiate as a result of the
Achilleas delay. They Calculated their losses at $1.36m.
The lower courts held that the loss of the lucrative deal was foreseeable under the rules in
Hadley V Baxendale.However,the House of Lords held it was the lowerfigure that was the
loss.This was on the basis that in the shipping industry, damages for late delivery would be
assessed on the basis of the difference between the charter rate and the market rate, and
the hirer wouldn't be liable for any other losses.The owners, however, wanted the loss to
include a very lucrative deal they had negotiated when the market was at its peak, which
they now had to renegotiate as a result of the Achilleas delay. They calculated their losses at
$1.36 m. The lower courts held that the loss of the lucrative deal was foreseeable under the
rules in Hadley v Baxendale. However, the House of Lords held it was the lower figure that
was the loss. This was on the basis that in the shipping industry, damages for late delivery
would be assessed on the basis of the difference between the charter rate and the market
rate, and the hirer would not be liable for any other losses.

There are two contrasting cases on this point: Victoria Laundry Ltd v Newman Industries
Ltd (1949) and The Heron II (1969)-
It was felt that the two rules stemming from Hadley v Baxendale should be reviewed,
and so they were in Transfield Shipping Inc. v Mercator Shipping Inc. (The Achilleas')
(2008).

The Achilleas was considered in Supershield Ltd v Siemens

Building Technologies FE Ltd (2009), where it was
confirmed that:
» Hadley v Baxendale remains the standard rule, but
» The Achilleas approach should be taken where the
Hadley v Baxendale approach would not reflect the
expectations or intentions that could be reasonably
imputed to the parties.

35.3.2 Mitigation
Mitigation limits the amount of damages that the
claimant may be awarded. The claimant is expected to
keep their damages to a minimum, and cannot claim for
losses they could reasonably have avoided.

The key question to ask in mitigation is whether the

the innocent party has acted reasonably.

For example, if a seller waited an unreasonably long

time and the price fell, they may be expected to bear
some of the loss. They would only receive the difference
between the contract price and the resale price at the
time the contract was broken. The same damages would
be due even if the seller believed that the price would
increase and their assumption is proved false.

However, while the claimant is bound to try to keep the

loss to an acceptable minimum or not to deliberately
increase the loss, they will not be bound to go to
extraordinary lengths in order to mitigate the loss. The
claimant is only expected to do whatever is reasonable
in the circumstances.
CASE EXAMPLE
Pilkington v Wood (1953)
The claimant bought a house with a defective title
due to the negligence of his solicitor, As a result
the claimant could not move until the issue had
been resolved. He incurred extra costs in hotel
bills and travelling expenses. He also telephones
his wife daily, ran up several other bills and
brought an action against the solicitor for these
costs. The solicitor argued that the claimant could
have brought his action against the seller, and
thus mitigate his losses in the action against the
solicitor, but this claim was rejected.
(no compensation, so it was rejected)

The claimant must not take any unreasonable steps th

would actually increase the amount of the loss. This a
seen in The Borag (1981).

CASE EXAMPLE
The Borag (1981)
A ship was detained for breach of contract and
the owners borrowed large sums of money at
exorbitant rates in order to gain its release. The
Court of Appeal would not allow recovery of
damages in respect of the interest, since it held
there was no real justification for incurring them.