Remedies for Breach of Contract and Restitution

Remedies for Breach of Contract and Restitution

Un-liquidated damages (that is, damages assessed by the court)

In Surrey CC v Bredero Homes (1993), the court refused to award damages against a defendant who had not complied with planning permission as there was no loss to the council. However, in Chaplin v Hicks (1911), damages were awarded for the loss of a chance to win a competition, although there was no certainty that the plaintiff would have been one of the winners.

Methods of compensating the claimant

Reliance damages rather than expectation damages may be appropriate where the benefits which would have been obtained by successful performance are difficult to assess, as in: McRae v Commonwealth Disposals Commission (1951), where the plaintiff recovered the expenses incurred in searching for a wreck which did not exist. Anglia Television v Reed (1972), where the leading actor in a film project withdrew at the last moment. The plaintiffs were able to recover all their wasted expenditure.

Restitutionary measure

In Attorney-General V Blake (2000), the House of Lords for the first time recognized that in some circumstances a ‘restitutionary’ measure of damages, requiring the defendant to pay over the profit made as a result of the breach of contract, may be appropriate. The case was an unusual one, involving a book published by a member of the security services who had spied for Russia. The House of Lords regarded the defendant as having been under something ‘akin to a fiduciary obligation’, and it is not yet clear how far the principle adopted in this case is likely to be applied in other situations.

Contributory negligence

This is only relevant where the liability in contract is identical with the liability in tort, that is, the breach is of a contractual duty to take care (Barclays Bank v Fairclough Building (1994)).

Failure to accept delivery and pay

If the seller is a dealer in mass-produced goods, then the damage to him will be the loss of profit on one transaction. The claimant had sold one item less than he otherwise would have during the year (Thomson v Robinson (1955)). However, if the mass-produced item is in short supply and the number of sales is governed by supply not by demand, then there is no loss of profit and damages would not be awarded (Charter v Sullivan (1957)). The damages revert to the difference between the contract price and market price in the case of second-hand goods even if the seller is a dealer (Lazenby Garages v Wright (1976)).

Remoteness of damage

In Hartley v Baxendale (1854), a mill was closed because of the delay of a carrier in returning a mill shaft. The court held that the carrier was not liable for damages for the closure of the mill as he was not aware that the absence of a mill shaft would lead to this conclusion. The following damages were said to be recoverable:

  • those arising naturally out of the breach;
  • those which because of special knowledge would have been within the contemplation of the parties. In Victoria Laundry v Newman Industries (1949), the rule was restated, and based on knowledge.

Application of remoteness rules

In Simpson v L & NWR (1876), the defendant was liable for loss caused to the plaintiff by delivering goods to Newcastle Show Ground the day after the show had finished. In Home v Midland Railway (1873), defendants were held not liable for exceptionally high profit lost by plaintiff through late delivery. They knew that shoes would have to be taken back if not delivered on 3 February, but not that the plaintiff would lose an exceptionally high profit.

Types of loss recognized

Pain and suffering consequent on physical injury.  Physical inconvenience. In Watts’s v Morrow (1991), damages were awarded to cover the inconvenience of living in a house whilst it was being repaired.  Damage to commercial reputation. In Gibbons v Westminster Bank (1939), damages were awarded to cover the losses caused by the wrongful referring of a cheque. Cf Malik v BCCI (1997) where the House of Lords held that compensation was payable for the stigma of having worked for an organization which had been run corruptly. Distress to claimant.

Last word

According to the House of Lords, it is sufficient if one of the major objects of the contract is to provide pleasure or to relieve anxiety. The whole contract need not be for that purpose. Thus, in Farley v Skinner (2001), the claimant recovered damages from a surveyor for failure to provide peace of mind when the surveyor failed to advise him that a house which he went on to purchase was on the flight path from Gatwick Airport.

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